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- The Foreign Portfolio Investors (FPI) have turned net sellers in the Indian equity market in 2024, offloading equities worth over ₹25,000 crore.
- This significant outflow is largely attributed to the rising US 10-year bond yields, spurred by increased US inflation rates.
- “The sectoral trend in FPI flows reflects heightened confidence on the domestic investment cycle and premium consumption,” analysts at ICICI Securities noted.
This article explores the recent trends in FPI activities within the Indian stock market, highlighting sector-specific impacts and future expectations.
Overview of FPI Movements in 2024
In the current fiscal year, Foreign Portfolio Investors have extracted more than $3 billion from the Indian equity markets, marking a significant shift in their investment strategy. This outflow coincides with a period of heightened US bond yields, which have made US fixed income assets more attractive relative to emerging market equities.
Sectoral Impact of FPI Selling
The selling has been predominantly in sectors such as financials, FMCG, energy, and IT, with financials alone seeing outflows exceeding $5 billion. Interestingly, while private sector banks faced heavy selling, PSU banks saw some buying, indicating a selective approach by FPIs towards different sub-sectors within financials.
Contrasting Actions by Domestic Institutional Investors
Despite the massive sell-off by FPIs, domestic institutional investors, including mutual funds, have stepped in to absorb the shock, particularly in private banks, energy, and FMCG stocks. This activity underscores the resilience and the differing perspectives of local versus foreign investors on the valuation and future potential of these sectors.
FPI Holdings and Future Outlook
As of the end of April 2024, FPI holdings in Indian equities were at a decadal low, with the overall asset under custody valued at approximately ₹66.27 lakh crore. Going forward, the behavior of FPIs will be crucial in determining the market sentiment and could potentially influence the strategic decisions of other investor categories.
Conclusion
The recent pullback by FPIs from the Indian equity market highlights a cautious approach amidst global economic uncertainties and local market dynamics. However, the robust buying in sectors like Telecom and Industrials suggests a nuanced view towards specific growth-oriented opportunities. Investors would do well to monitor these trends closely, as they could indicate broader shifts in the investment landscape.
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