FPIs Remain Net Sellers for Three Days Straight

Foreign Portfolio Investment (FPI) refers to the purchase of foreign financial assets, including fixed deposits, stocks, and mutual funds. These investments are held passively by the investors, who are termed Foreign Portfolio Investors. Foreign Portfolio Investment (FPI) in the Indian stock market is a crucial component of the country’s financial landscape. FPI refers to investments made by foreign individuals or institutions in Indian securities such as stocks, bonds, and other financial instruments. These investments play a significant role in providing liquidity and stability to the Indian capital markets. FPI is regulated by the Securities and Exchange Board of India (SEBI) and is subject to certain restrictions and guidelines. Foreign investors looking to participate in the Indian stock market through FPI must adhere to these regulations to ensure compliance with Indian laws.The stream of FPI into the Indian stock market has an extreme impact on the economy, influencing stock prices, mutual fund, exchange rates, and overall Indian stock market sentiment. It also brings in valuable foreign capital, which can help fund infrastructure projects and drive economic growth.Overall, FPI in the Indian stock market is a vital source of investment that contributes to the development and stability of the country’s financial markets.Investors aim to diversify and achieve substantial returns by proceed into foreign markets, accepting higher risks for the potential of greater rewards. Today, foreign portfolio investment has become a popular option for individuals, businesses, and governments alike.

FPIs Selling due to fear of Recession:

Foreign portfolio investors (FPIs)remained net sellers for the third consecutive session on Tuesday. FPIs offloaded equities worth Rs 3,531.2 crore, according to provisional data from the National Stock Exchange. Domestic investors remained net buyers for the third consecutive session and mopped up equities worth Rs 3,357.5 crore, the NSE data showed. Foreign portfolio investors (FPIs) sold Indian stocks totaling Rs. 13,400 crore in the last two sessions, including Rs. 10,073 crore on Monday, according to NSE data. This significant sell-off reflects investor concerns about a potential U.S. recession affecting market sentiment.

Multiple reasons for selloff from FPIs:

As per the Union Budget 2024, FPIs had turned negative on Indian stocks due to increased long-term and capital gains taxes. However, the recent pace of selling has been notably higher compared to post-budget selling. U.S. job growth unexpectedly slowed in July, raising recession fears while the Fed refrains from cutting rates. Additionally, rising tensions in the Middle East, high valuations, weak forecasts from key tech companies that fueled much of the 2024 Wall Street rally, and concerns over a potential reverse Yen carry trade are contributing to the uncertainty.

Conclusion: FPIs are concerned about the U.S. recession, tensions in the Middle East, Japan’s rate hike, and additional taxes from the Indian government, leading to a significant sell-off in the Indian stock market. Meanwhile, DIIs are seizing this opportunity by consistently buying stocks in India.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.