FPIs offload ₹22,420 crore from Indian equities in November: 5 key factors behind sell-off | Stock Market News

Foreign portfolio investors (FPIs) extended their robust selling streak in Indian markets in the first fortnight of this month, amid the uptrend in the US market and US bond yields, which was fueled by Republican Donald Trump’s victory in the US presidential elections and the latest US Federal Reserve’s interest rate cut verdict. However, the US Fed has clarified that it is no hurry to cut rates.

FPI sell-off hit a record high in October amid ongoing geopolitical tensions in the Middle East and cheaper valuations in the Chinese stock market. FPI outflows recorded in October were the highest ever in a single month in Indian markets. FPIs turned net sellers in October after a sharp U-turn over global cues.

According to the National Securities Depository Ltd (NSDL) data, FPIs offloaded ₹22,420 crore worth of Indian equities, and the net outflow stood at ₹26,343 crore as of November 15, taking into account debt, hybrid, debt-VRR, and equities. October’s FPI outflow hit a 10-month high, the highest sell-off from the Indian market YTD. The total debt investment was ₹362 crore.

Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

“FPIs have been continuing with their massive selling of ₹113858 crores in October with another ₹22420 crores in November through 15th (NSDL). Two factors in the FPI selling stands out: One, FPIs continued to buy in the primary market ( ₹9931 crores) while selling in the cash market through exchanges ( ₹32351 crores) resulting in a net sell figure of ₹22420 crores through 15th in November. Second, FPIs have been selling in the debt market too with the sell figure reaching ₹4717 crores through November 15th.

The relentless FPI selling has been triggered by the cumulative impact of three factors: one, the high valuations in India; two, concerns regarding the earnings downgrade; and three, the Trump trade.

The Trump victory has impacted both the equity and bond markets in the US. Equities have boomed on expectations of the positive impact of the promised corporate tax cut by Trump and his pro-business policies. The bond market has been impacted by concerns of the potentially rising fiscal deficit under Trump. The sharp up move of the 10-year US bond yield to 4.42% has negative implications for emerging markets. This is reflected in the FPI selling in the debt market, too.”

Vipul Bhowar, Senior Director Listed Investments, Waterfield Advisors

“Several factors have led to the selling activity by FIIs: weak earnings, high valuations compared to other markets, and global economic influences such as rising U.S. bond yields. While some of the selling by FIIs in the secondary market is being counterbalanced by buying in the primary market—through large initial public offerings like those from Swiggy and Hyundai—it is expected that FIIs will reduce their selling as we near the end of the calendar year. Fresh allocations or significant investments are likely to occur once there is greater clarity regarding the Trump administration’s policies.

FPIs this calendar year have been reducing their weightage in mature sectors when growth would be closer to our nominal GDP and allocating capital to high-growth businesses. For example, in the financial sectors, FPIs have been increasing allocation in Capital Market themes like Asset management, exchanges, and healthcare.

Automobiles, Metals, and Construction can be impacted by foreign portfolio investment (FPI) withdrawals. Rising costs and changing consumer preferences are driven by concerns over global commodity prices and economic slowdowns. The construction sector is particularly sensitive to shifts in government spending and infrastructure projects.

The new framework established by the RBI and SEBI for reclassifying foreign FPIs as FDIs is expected to positively impact foreign inflows into India. This framework provides greater flexibility for foreign investors and reduces barriers to entry. With the new regulations, FPIs can hold larger stakes in Indian companies without the need for immediate divestment. This creates opportunities for increased foreign investment, particularly in mid-cap companies, and helps attract long-term capital. As these changes are implemented, it will be essential to monitor their influence on investment patterns and market dynamics to assess their long-term effectiveness in attracting foreign capital.

Foreign Portfolio Investors are affected by India’s economic fundamentals, regulatory changes, market performance, global conditions, and currency stability. Due to geopolitical uncertainties and changing economic landscapes, their activity is likely to remain volatile.

The upcoming large Initial Public Offerings may briefly increase investments in the primary market, but ongoing interest will depend on macroeconomic stability and corporate earnings performance.”