FPI sales at a record high as virus spooks markets

Expect uptick in purchases by foreign portfolio investors, as some macro signs look good, say analysts

Foreign portfolio investors (FPIs), who have been the prime drivers of every bull run that the Indian capital market has seen till date, have been record sellers during the current month.

Till date in March, FPIs have sold equity and debt cumulatively worth Rs. 67,306 crore, which is the highest ever witnessed in any single month, as per data from National Securities Depository Limited (NSDL).

Further, while equity has seen the worst-ever monthly outflows of Rs. 36,217 crore till date in March, debt outflows at Rs. 31,982 crore is the highest in nearly seven years. In June 2013, FPIs were net sellers at Rs. 33,135 crore in the debt segment. Incidentally, some of the recent trading sessions have seen foreign investors sell shares or bonds close to $1 billion in a single day on the back of increasing concerns over the COVID-19 pandemic that has made investors move away from riskier asset classes.

On March 13, the net selling by FPIs in the equity segment was $910 million. On March 11, the debt segment saw foreign investors’ net sales at almost $1.08 billion.

Similarly, on March 9, when the benchmark Sensex recorded a fall of 1,941.67 points — its biggest single-day fall till then — foreign investors sold shares worth $948 million.

In the current calendar year, FPIs are net sellers at Rs. 57,379 crore as the first two months of 2020 saw some amount of buying by such investors.

Sales to slow down

Market participants, however, believe that with the valuations taking a massive hit on account of the ongoing fall, institutional investors, especially overseas entities, will slow the pace of selling to buy heavily beaten down quality stocks. “We might see some more selling by FPIs, after which there should be buying activity visible,” said Harendra Kumar, MD, institutional equities, Elara Capital.

“There are many good-quality stocks that are available at their book value or even below their book value. Also, crude is at a very low level that benefits India more than many other economies and rupee has performed relatively better than other Asian currencies,” he said.

“So, some of the macros are in favour of FPIs investing in India,” added Mr. Kumar. In 2019, FPIs were net buyers in the equity and debt segments at Rs. 1.01 lakh crore and Rs. 25,882 crore, respectively.

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