FPIs Reverse Sentiment, Start Dumping Equities This Week. Find Out Why

FPIs began the trading week on a positive note and infused Rs 3,126 crore in equities during the first 2 trading days in the week. However, sentiment changed and the last 3 sessions saw major outflows

However, this outflow failed to impact the overall trend in December which remained positive.

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Foreign portfolio investors (FPIs) became net sellers in Indian equities this week after continuing their buying outlook in the first two weeks of the month. The investors withdrew Rs 976 crore in the week as the US dollar strengthened and the US 10-year bond yields rose steadily, impacting investor sentiments.

The investors began the trading week on a positive note and infused Rs 3,126 crore in equities during the first two trading days in the week, reported PTI. However, the investors turned around this sentiment and began dumping equities in the last three sessions of the week. During the period, the investors offloaded Rs 4,102 crore in the segment. 

This led to an overall net outflow of Rs 976 crore during the week under review, official data from the depositories revealed. However, this outflow failed to impact the overall trend in December which remained positive.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India noted, “FPIs have infused Rs 21,789 crore into Indian equities so far this month, reflecting continued confidence in India's economic growth potential and its resilient markets.FPIs adopted a cautious approach due to the US Fed meeting and uncertainty about its outcome and future policy direction.”

The expert added that while the US Fed slashed interest rates by 25 basis points for the third time this year, the authorities indicated lesser rate cuts in the future resulting in global market sell-offs.

“Factors like high valuations, weak corporate earnings for the September quarter, expectations of subdued results for December, rising inflation, slower GDP growth, and a depreciating rupee have further weighed on investor confidence,” Srivastava pointed out.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, explained that the surging US dollar and a steady rise in the 10-year bond yields to 4.5 per cent added to the selling from the FPIs. “India-specific issues like slowing growth concerns and flat corporate earnings in Q2 also contributed to the FPIs selling. The strength of the US economy, good corporate earnings growth, and strong dollar are factors favouring the US,” Vijayakumar stated.