Market fall, record selling pulls down FII holdings to 13-month low

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The sharp correction in the Indian stock market, coupled with persistent selling by foreign institutional investors (FIIs), has led to a significant decline in their assets under custody (AUC), which hit a 13-month low in February.

As of February, FIIs' AUC stood at Rs 62.38 lakh crore, marking its lowest level since January 2024. This represents a sharp decline of Rs 15.58 lakh crore from the peak of Rs 77.96 lakh crore in September 2024.

fii holdings

FIIs offloaded Rs 78,027 crore in January and Rs 34,574 crore in February in the Indian markets. Notably, selling pressure was more intense in the first half of February, with FIIs liquidating Rs 21,272 crore, compared to Rs 13,302 crore in the latter half of the month.

Sector-wise, in the second half of February, the auto sector witnessed the highest FII outflows, with Rs 3,279 crore worth of sell-offs, followed by healthcare and FMCG at Rs 2,996 crore and Rs 2,568 crore, respectively.

Other sectors that faced substantial selling included construction materials (Rs 1,820 crore), financials (Rs 1,647 crore), construction (Rs 1,465 crore), and capital goods (Rs 1,258 crore). Additionally, consumer durables, power, and oil & gas saw sell-offs of Rs 1,241 crore, Rs 1,234 crore, and Rs 943 crore, respectively.

On the buying side, FIIs showed interest in telecom, chemicals, and media. The telecom sector emerged as the biggest gainer, with FIIs purchasing Rs 5,661 crore worth of stocks, followed by chemicals at Rs 112 crore and media at Rs 34 crore.

Despite the ongoing sell-off, FII ownership in the Indian market rose to a five-month high of 16.24 percent in February, up from 15.98 percent in the previous month, a level last seen in September 2024.

Indian markets witnessed a sharp selloff in February, with the benchmark Sensex and Nifty dropping 5.6 percent and 5.9 percent, respectively. Broader markets faced even steeper declines, as the BSE MidCap fell over 10.5 percent and the SmallCap index plunged 14 percent.

However, analysts caution that there are no clear indications of a reversal in the selling trend. While oversold markets may witness a technical rebound, FIIs are unlikely to drive this recovery. Experts attribute the continued outflows to slowing economic growth, weak corporate earnings, and high valuations. Additionally, the availability of attractive, risk-free returns in markets like the US has prompted FIIs to reallocate funds away from India.

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