FPIs continue equity selling spree, outflows touch ₹44,396 crore till Jan 17
Amid rising U.S. yields driven by a strengthening dollar and ahead of US President-elect Donald Trump’s inauguration, Foreign Portfolio Investors (FPIs) extended their selling spree in Indian equities, with net outflows reaching ₹44,396 crore as of January 17.
This net selling is in sharp contrast to net purchases of ₹15,448 crore. FPIs had net sold equities worth ₹94,017 crore and ₹21,612 crore in October and November 2024 respectively.
The past week was the third straight week when FPIs remained net sellers in equities. On the debt markets front, FPIs have net sold about ₹11,000 crore till January 17, data with depositories showed.
In 2024, FPIs made net investments in Indian equities, albeit at a token level of ₹427 crore. This was significantly lower compared to the net investments of ₹1,71,107 crore in calendar year 2023.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said that the relentless FPI selling in the cash market continued last week. “FPIs have been sellers on all days this month except January 2nd. So far, through 17th January FIIs have sold equity for ₹ 45498 crores through the stock exchanges. They bought for ₹1101 crore in the primary market”, he said.
Reasons for sustained selling
The principal reasons for the sustained FPI selling are the strength of the dollar and the rising bond yields in the US. With the dollar index above 109 and the 10-year US bond yield above 4.6 per cent, it is logical for FPIs to sell in emerging markets, particularly in the most expensive emerging market India, he said.
“Since US bond yields are attractive, FPIs have been sellers in the debt market, too. A reversal of the FII flows will happen only after the market signals peaking of the dollar and US bond yields followed by their decline. This, in turn, will depend on President Trump’s tariff policies which presently are not yet clear.”, Vijayakumar added.
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Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said there is no stopping FPIs from selling into the Indian equity markets as they went into a selling spree this week as well. “The continued depreciation in Indian rupee is exerting significant pressure on foreign investors leading them to pull the money out of the Indian equity markets.
In addition to that, higher valuation of Indian equities, despite recent corrections, expectation of a rather weak earning season and uncertainty over the pace of economic growth are making investors wary”, he said.
Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors, said that”
As of January 2025, foreign portfolio investors (FPIs) have resumed being net sellers, withdrawing funds due to concerns about corporate earnings and the overall economic outlook.
Challenges for the recovery
Key challenges for the recovery of FPIs include fears of a prolonged global recession, geopolitical tensions that may negatively impact investor sentiment, and a stronger US dollar along with rising bond yields, which could prompt investors to prefer safer US assets over Indian markets”, he said,
A cyclical improvement in corporate earnings, along with stronger GDP growth driven by resilient domestic consumption and increased government spending on infrastructure projects, could lead to a potential turnaround in foreign portfolio investment (FPI) flows into India, Bhowar said.
Additionally, the Reserve Bank of India’s potential interest rate cuts may create a more favourable borrowing environment and make US bonds less attractive, further encouraging FPI inflows, he added.
