No, FPI selling is not an exodus. But then why is it hurting so bad?
Subscribe to enjoy similar stories. The noise around so-called heavy selling by foreign investors in India masks a key distinction: there are no signs of a large-scale exodus. Yet, they are also willing to exit at lower levels, amplifying the bearish sentiment.
Foreign portfolio investors (FPIs) have net sold shares worth $21 billion over four months through January end, shows data from the National Securities Depository Ltd (NSDL). That’s about 2.7% of their total equity holdings worth $782 billion as of January. This actual selling accounts for just 14.2% of the $148 billion decline in their assets from a cumulative $930 billion as of September end.
The rest is attributable to unrealised losses to their portfolios. “The figure of actual selling as a proportion of total assets might be insignificant but what's causing the turbulence is willingness to continue selling at lower levels despite being underweight India," said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company Ltd. Shah explained that domestic institutional investors like mutual funds were bidding at lower levels to make FPI exits costly.
This has caused the Nifty to fall 12.3% from a record high of 26,277.35 on 27 September to 23,031.4 on Thursday. Also read | FPIs dumped Indian financial stocks in January. But not all is bad for the sector. The small- and mid-cap (smid) indices have fallen more than the benchmark, which is typical during a correction, with the small-cap index slipping into bear market territory — a drop of 20% or more from the record high — on Friday.
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