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Foreign Portfolio Investors (FPIs) continued their aggressive selling of Indian equities for second consecutive week in October, offloading shares worth about ₹28,000 crore this past week. Taken together with first week net selling of ₹30,711 crore, the total shares net sold by FPIs till October 11 stood at ₹ 58,711 crore, data with depositories showed.
The aggressive FPI selling of Indian equities has taken a toll on Indian rupee, which on Friday for the first time ever breached ₹84 mark against the US dollar.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the major trend in foreign portfolio flows in October, so far, has been the sustained selling by FPIs. “FPIs have been following a strategy of ‘Sell India, Buy China’ after the Chinese authorities announced monetary and fiscal measures to stimulate the slowing Chinese economy. FPI money has been moving to Chinese stocks, which are cheap even now”, Vijayakumar said.
Hang Seng index (Chinese H stocks are listed in Hong Kong) is now trading at a PE of about 12 while Nifty is trading at a PE of 23 times estimated FY25 earnings. “So more money can move to Chinese stocks. But India has much better growth prospects now compared to China and, therefore, India deserves premium valuations. But the valuation differential is too big now and this can sustain the FPI selling for some more time”, Vijayakumar added.
No major impact
He highlighted that FPIs massive selling in October didn’t have a serious impact on the market since the entire FPI selling has been absorbed by Domestic Institutional Investors (DIIs) who are receiving sustained fund inflows. This trend of FPI selling and DII buying is likely to sustain in the near-term, Vijayakumar added.
The recent FPI sell-off has raised concerns about the sustainability of India’s stock market rally, as FPIs turn their focus to Chinese stocks, which have surged by 25 percent in recent weeks due to government-led economic stimulus in China. Contributing to the FPI selling frenzy are ongoing tensions in West Asia and SEBI’s recent revision of index derivatives norms, both of which have unsettled foreign investors.
However, market experts remain optimistic about India’s market resilience, citing robust retail investor participation. Despite China’s current rally, many foreign investors remain cautious about investing there, and much will depend on the long-term recovery of the Chinese economy, they noted.
Domestic mutual funds have pumped nearly $30 billion into Indian equities this year, far outpacing the $10 billion invested by FPIs, they pointed out.
Also China’s Finance Ministry gave no specific figure for fiscal stimulus at the closely watched press conference on Saturday. This reportedly came as some disappointment for investors, implying that the recent stock market rally in China may fizzle out in the coming week, they added.
On Saturday, China’s Finance Ministry reportedly reiterated their Central Government still has “room” to raise debt and the fiscal deficit. It, however, didn’t reveal any broad-based stimulus measures markets were hoping for, economy watchers said.
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