Foreign portfolio investors were net buyers at Rs 32,365 crore in the month of July but certain sectors including metals, energy, power, and IT saw the foreign investors press the sell button on the back of concerns related to high valuations and topline growth outlook, among other factors.
As per NSDL data, July saw FPIs selling shares worth nearly Rs 3,000 crore in the metal and mining space, followed by selling shares worth Rs 2,635 crore in oil & gas, and shares worth Rs 2,498 crore in the power segment. The IT segment saw FPIs offloading shares worth Rs 981 crore.
Market participants are of the view that foreign investors are currently in a cautious mode in certain sectors and hence cannot be viewed as “consistent sellers”.
“They get in and get out where the outlook for the next 6-12 months is not good. They will turn net buyers for the segments again once the outlook for the sectors change,” says Deepak Jasani, Head of Retail Research at HDFC Securities.
Another area where FPIs were net sellers was construction, where outflows for the month were around Rs 2,723 crore. Meanwhile, financials continued to attract interest from FPIs with inflows to the tune of Rs 9,170 crore.
Apart from financials, the other segment that saw significant inflows was the telecommunication space with inflows amounting to around Rs 7,944 crore, followed by consumer services at Rs 4,704 crore, healthcare at Rs 3,299 crore, and capital goods at Rs 2,792 crore.
FII outflows on the rise
Interestingly, FPIs and mutual funds have been taking a contrarian view on the Indian stock market for a while now, as the fund industry has been benefiting from strong retail inflows in the form of SIP money.
This has led to a scenario wherein the cumulative holding of MFs in the stock market has become quite close to that of FPIs, with the margin narrowing to a record low.
Data from primeinfobase shows that the cumulative stake held by domestic institutional investors (DIIs) increased to 16.23 percent during the June quarter.
On the other hand, FPIs pulled out Rs 7,693 crore from the market during the same quarter with their cumulative shareholding declining to a 12-year low of 17.38 percent as on June 30, 2024, down by 34 basis points from 17.72 percent as on March 31, 2024.
The selling spree continues as FPIs net sold shares worth a little over Rs 10,000 crore on August 5 -- the highest single-day selling since June 4 when Lok Sabha election results were announced.
Fisdom's Nirav Karkera believes that going forward, one can expect FPIs to largely remain positive on Indian equities, with a bias towards large-caps along with a selective approach in the mid and small-cap packs.
“It won't be surprising if we soon witness a calibrated re-entry of FIIs into Indian equities,” he added.
In the current month till date, FPIs have been net sellers at Rs 11,111 crore, as per data from NSDL.
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