Gross equity investments by FIIs hit 15-month low at $25 bn in January

markets

Flows from foreign institutional investors (FIIs) in January has been quite subdued with gross purchases plunging to a 15-month low amid both domestic and global headwinds.

Data from NSDL shows that FIIs’ gross equity purchases this month stood at $24.93 billion – lowest since October 2023. This also reflects a 42 percent drop from the 12-month average of $43.06 billion and over 50 percent plunge from its record gross buying in September 2024 of around $52 billion.

With gross selling at $32.60 billion in January, the month has recorded a net outflow of $7.67 billion till now, underscoring sustained selling pressure.

Meanwhile, FII equity assets under management (AUM) declined to an eight-month low of $786 billion as of January 15, down by over $145 billion from the record high of $931 billion in September last year. The sharp decline was primarily driven by a broader market correction.

Akshay Chinchalkar, Head of Research at Axis Securities, says that while January has historically been a weak month -- averaging a 0.6% decline over the past two decades -- the magnitude of selling this year has been extraordinary.

"Based on provisional data, an additional Rs 2,600 crore was withdrawn by foreign investors on January 29 alone, marking 19 consecutive days of outflows -- an unprecedented streak. Even in October 2008, the sell-off was not as relentless, as there was at least one day of net inflows on October 21. This time, there has been no such respite," he said.

The benchmark indices Sensex and Nifty have fallen over 3 percent each so far this month while broader indices like BSE MidCap and BSE SmallCap have lost over 8 percent each.

Despite this selling pressure, FII ownership in Indian equities stood at 16.1% around mid-January, slightly above the 12-year low of 16% recorded in October 2024. The FII gross buy-to-sale ratio hit a 31-month low of 0.76, significantly below the long-term average of 1.05, further highlighting the subdued investment sentiment.

Apart from selling in cash market, FIIs are also raising their bearish positions in future and options segment. Interestingly, FIIs turned net short on index futures on October 6 -- just 10 days after the Nifty and Bank Nifty peaked.

The Nifty has mirrored their positioning with remarkable accuracy. Short positions first peaked around November 14, after which the Nifty bottomed out and staged a brief rally before renewed bearish positioning from December 11 sent markets to fresh lows.

Analysts are now closely watching short positioning trends. FII short positions recently maxed out at 350,000 contracts but have since started to shrink over the past few sessions.