Top 10 biggest single-day market falls of CY24: FPIs still a huge factor even as DIIs try to provide counterbalance

Data shows that on Thursday when the benchmarks lost more than two percent each, FPIs were net sellers at Rs 15,243 crore, which was the highest single-day net sales by overseas investors in the current calendar year.

Foreign portfolio investors (FPIs) still continue to hold significant sway over the Indian stock market even as their domestic counterparts have gained in size and have been consistently providing some amount of stability on days of huge swings.

Data shows that on October 3 when the benchmarks lost more than two percent each, FPIs were net sellers at Rs 15,243 crore, which was the highest single-day net sales by overseas investors in the current calendar year.

More importantly, if one takes into account days of the ten biggest falls in the current calendar year (CY24), foreign investors have been net sellers on all occasions even as domestic institutional investors (DIIs) have been net buyers barring one instance.

This year's largest single-day fall was witnessed on June 4 – the day general election results were announced – with the Sensex shedding 5.74 percent. That day saw FPIs selling shares worth Rs 12,436 crore, deepening the market decline while DIIs also contributed to the sell-off with net sales of Rs 3,319 crore.

Incidentally, that was also the only instance among the top 10 biggest falls of the year when DIIs ended the day as net sellers.

On August 5, for instance, when the Sensex fell 2.74 percent, DIIs were net buyers at Rs 9,156 crore while FPIs were net sellers at Rs 10,074 crore.

Experts believe that a combination of escalating geopolitical tensions, especially in the Middle East region, and concerns over global energy prices and trade disruptions have created a risk-off sentiment and FPIs are quick to exit when these macroeconomic factors turn unfavourable. In sharp contrast, DIIs have acted as a consistent counter stabilising force in the market, they add.

Nirav Karkera, Head of Research, Fisdom is of the view that DIIs’ ability to absorb the selling pressure reflects their confidence.

“They are not waiting for deeper discounts, they are buying at current levels, even as FIIs sell. This shows conviction and liquidity on the domestic front, which helps stabilise the market in the face of external shocks,” he says.

“FIIs have consistently booked profits and exited at the first sign of trouble, whereas DIIs, though not always net buyers, tend to play a more supportive role," he added. Indeed, as this is clearly corroborated by the data related to the top 10 falls in 2024.

Overall, FPI inflows into the country have been mixed this calendar year. While January witnessed a major net outflow of Rs 25,744 crore, it was followed by a modest inflow of Rs 1,539 crore in February.

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Thereafter, March saw FPIs investing Rs 35,098 crore, which continued into June and July, with net inflows of Rs 26,565 crore and Rs 32,365 crore, respectively.

However, April and May saw net outflows. September recorded the largest inflow of Rs 57,724 crore, bringing the total net FPI investment for 2024 to Rs 88,975 crore as of October 3. Till date, in October, net outflow has been Rs 11,635 crore.

“Recently, we saw a sharp surge in FII interest, but a significant portion of FII money is often referred to as ‘hot money’. FIIs are quick to invest when they see potential for growth, but they are just as fast to exit at the first signs of trouble or macroeconomic tension. The positive aspect is that, despite the sizable sell-off, we had also witnessed strong inflows recently. In a way, this sell-off reverses some of the inflows we saw earlier, bringing us back to where we were before the recent surge,” explains Karkera.

In a recent conversation with Moneycontrol, Prashant Khemka, Founder of White Oak Asset Management had said that there’s definitely chatter about reallocating from India to China after the Chinese rally.

Some foreign funds are already making this shift, and it could continue. But he added that the risk is “Low single-digit risk—not a double-digit risk certainly”. He added that foreign flows are just one part of the equation.

While FIIs remain reactive to global risks, experts believes that DII intervention has so far kept the market from going into a freefall mode and that trend would continue.

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