FPIs invest Rs 11,483 cr in primary mkt

Domestically, after being net buyers in June and July, some FPIs might have chosen to book profits following a strong rally in previous quarters. Additionally, mixed quarterly earnings and relatively higher valuations have made Indian equities less attractive, said Vipul Bhowar, Director Listed Investments, Waterfield Advisors

FII Trading

♦ In last 12 mths, FPIs invested Rs64,824 cr

♦ With this, FPIs’ total investment at Rs1,82,965 cr

♦ And their total sell-off was Rs1,18,141 cr in last 1 yr

Mumbai: Foreign Portfolio Investors (FPIs) have sold equity worth Rs32,684 crore (till August 17) through the stock exchange, while investing Rs11,483 crore through the primary market and others category, industry data said on Saturday.

According to market watchers, this trend is likely to continue since India is the most expensive market in the world now and it is rational for FPIs to sell here and move the money to cheaper markets.

The picture doesn’t change even if the market turns more bullish on fears regarding US recession receding, they added.

According to Vipul Bhowar, Director Listed Investments, Waterfield Advisors, globally, concerns about the unwinding of the Yen carry trade, potential global recession, slowing economic growth, and ongoing geopolitical conflicts led to market volatility and risk aversion.

“Domestically, after being net buyers in June and July, some FPIs might have chosen to book profits following a strong rally in previous quarters. Additionally, mixed quarterly earnings and relatively higher valuations have made Indian equities less attractive,” said Bhowar.

Despite these factors, India’s strong economic performance, including GDP growth, reduced fiscal deficit, manageable current account deficit, and strong sector growth and industrial production, continues to attract many FPIs, indicating that FPI flows into India should persist, said experts.

The primary market issues are at comparatively lower valuations, while in the secondary market the valuations continue to remain high.

That is why FPIs are buying when securities are available at fair valuations and selling when the valuations get stretched in the secondary market.

In the last 12 months or so, FPIs invested more than Rs64,824 crore in the Indian share market. As per data by depositories, FPIs total investment was Rs1,82,965 crore, and a total sell-off of Rs 1,18,141 crore last year.

Before that, FPIs withdrew Rs 25,586 crore in May on poll jitters and over Rs 8,700 crore in April on concerns over a tweak in India’s tax treaty with Mauritius and a sustained rise in US bond yields. According to the data, FPIs withdrew a net amount of Rs 21,201 crore in equities so far this month (August 1-17). So far this year, FPIs invested Rs 14,364 crore in equities, data with the depositories showed. FPI outflows witnessed in August were mainly driven by a combination of global and domestic factors.

“Globally, concerns about the unwinding of the Yen carry trade, potential global recession, slowing economic growth, and ongoing geopolitical conflicts led to market volatility and risk aversion,” Vipul Bhowar, Director of Listed Investments, Waterfield Advisors, said.

The outflow was triggered due to the unwinding of the Yen carry trade after the Bank of Japan raised interest rates to 0.25 per cent. Domestically, after being net buyers in June and July, some FPIs might have chosen to book profits following a strong rally in previous quarters. Additionally, mixed quarterly earnings and relatively higher valuations have made Indian equities less attractive, Bhowar added.

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said the post-budget announcement of an increase in capital gains tax on equity investments has largely fuelled this selling spree. In addition, FPIs have been cautious due to the high valuations of Indian stocks, coupled with global economic concerns like rising recession fears in the US amid weak jobs data, uncertainty over the timing of interest rate cuts, and the unwinding of yen carry trade, he added. A significant trend in FPI flows recently, which became pronounced in August, is the sustained selling by them through the exchange while continuing to invest through the ‘primary market and others’ category. This difference in FPI behaviour is due to the differences in valuations.

“The primary market issues are at comparatively lower valuations, while in the secondary market, the valuations continue to remain high. So, FPIs are buying when securities are available at fair valuations and selling when the valuations get stretched in the secondary market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. On the other hand, FPIs invested Rs9,112 crore in the debt market in August so far. This has taken the tally to Rs1 lakh crore so far in 2024.