Moneycontrol Pro Panorama | Reinvesting in Value: FPIs embrace primary market

Rather than abandoning the Indian market, the FPIs are reallocating their investments to stocks where they see value.

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Indian markets are experiencing selling pressure ahead of the US elections, with the India VIX rising over 8 percent to 17.19 percent, marking a new four-month high. Foreign Portfolio Investors (FPIs) continue to sell off in November following a record ₹1 lakh crore in sales during October.

Global markets are increasingly focused on the US presidential elections, leading to heightened volatility across various markets. The FPIs are liquidating positions in the cash market while maintaining their short positions in the derivatives market. The Long-Short Ratio at the beginning of the November series indicates that 78 percent of traders' positions are on the short side.

In addition to the US elections, the Federal Reserve's interest rate decision this week is also weighing on investors' minds. The Federal Reserve's monetary policy meeting is scheduled for November 6-7. While markets may react to events like elections in the short term, they tend to be influenced more by economic factors and corporate performance over the medium and long term.

Adding to the uncertainty, China's National People's Congress (NPC) Standing Committee will meet on November 4-8. Investors will be closely monitoring the stimulus measures that the Chinese government plans to introduce, with expectations of one of the largest fiscal packages since the pandemic aimed at boosting economic sentiment.

The impression from the recent selling by FPIs may suggest that foreign investors are exiting India due to various factors, including high valuations. However, this does not appear to be the case.

A report indicates that FPIs are actively investing in the primary market through Initial Public Offerings (IPOs). With an investment of ₹19,841.9 crore (approximately $2.36 billion), FPIs have made their largest investment since November 2021. In the first 10 months of the year, FPIs invested a total of $10.27 billion in India's IPO market.

Rather than abandoning the Indian market, the FPIs are reallocating their investments to stocks where they see value. They are selling off frontline and mid-cap stocks that have surpassed their long-term valuation levels.

The primary market presents an opportunity for both FPIs and retail investors to invest when the secondary market is experiencing selling pressure. While the selling figures from the FPIs may appear alarming, it is important for investors to consider the opportunities available in the primary market.

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