FPIs offloaded over Rs 25,000 cr Indian stocks in May, turning net sellers second month

NEW DELHI: The selling spree in Indian stock markets by foreign portfolio investors (FPIs) turned aggressive in May, standing at Rs 25,586 crore as the month ended.

The consistent offloading of money from Indian stocks is partly attributable to a strong US dollar, sticky inflation particularly in the food segment, and poll outcome-related anxieties.

However, in the past few sessions, they seemed to have slowed down on selling, expecting a strong performance in the indices. Both Nifty and Sensex also touched all-time highs lately, accumulating huge sums of money for investors.

A week ago, the total FPI selling, cumulatively, was around Rs 28,000 crore, data from National Securities Depository Limited (NSDL) showed.

"FPIs have been sellers in equity on most trading days in May. As per NSDL data FPIs have sold equity for Rs 25,586 crore in May," said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

"The main trigger for the FPI selling has been the outperformance of the Chinese stocks. The Hang Seng index boomed 8 per cent in the first half of May triggering selling in India and buying in Chinese stocks. Another reason was the spike in US bond yields."

FPI activity in June will be crucially influenced by the election results to be announced on June 4, and the market response to that.

"If the election results ensure political stability the market is likely to respond positively to that. FPIs also are likely to turn buyers in such a scenario. However, in the medium term US interest rates will exert more influence on FPI flows," Vijayakumar added.

"The relatively high valuations and weak earnings, particularly in the financial and IT sectors where foreign portfolio investors (FPIs) have a high allocation, along with political uncertainties such as ambiguity around the outcome of the Lok Sabha elections, global risk-off sentiment, and the appeal of Chinese markets, have led to FPI selling," said Vipul Bhowar, Director, Listed Investments, Waterfield Advisors.

In April too, FPIs were net sellers in Indian stocks, as the ongoing geopolitical crisis in the Middle East then likely pushed investors to take money off their portfolios. FPIs, who continued to remain net buyers for the third month until mid-April, have cumulatively sold stocks worth Rs 8,671 crore by the end of the month.

Interestingly, at a time when overseas investors have been remaining net sellers in Indian equities for the past several sessions, domestic institutional investors stayed net buyers, largely making up for the outflows by foreign investors.