fpi: FPIs keep selling, May tally at $4.6 billion

Foreign investors net sold Indian equities worth over $4.6 billion (₹35,000 crore) in May so far – the highest in emerging markets – amid concerns over the possibility of a recession in the US, rising interest rates and a firming dollar. This flow included their activity both in secondary and primary markets.

Only on the stock exchanges, overseas investors pulled over ₹41,000 crore out of local stocks – the highest in a month since March 2020 – when they sold shares worth ₹57,000 crore amid the pandemic led lockdown.

Following the selling in May, the net outflow from the secondary market rose to ₹1.73 lakh crore so far in 2022 as against purchases of ₹6,570 crore in the primary market. In 2021, Foreign Portfolio Investors (FPIs) sold shares worth ₹54,542 crore in the secondary market but pumped in ₹80,310 crore in the primary market.

HSBC said current FPI outflows are just short of breaching the level (as a percentage of the market cap) observed during the Global Financial Crisis in 2008-09. “With the end of easy money, market risk tolerance is low, and this seems unlikely to change in the near term. Rising inflation and the stickiness of it is the single biggest local factor that will continue to weigh on India’s investment case,” said Amit Sachdeva, India equity strategist at HSBC.

Analysts believe that flows from FPIs are expected to remain volatile in the near term.

“There is no doubt that for the money which has gone out, from a positioning and valuation perspective, emerging markets start to look more attractive, but until the underlying fundamental factors shift, it might not be sufficient just for volatility to come down or people to get interested back again in emerging market assets,” said Sameer Goel, global head of EM Research, Deutsche Bank.