After two months of heavy selling, foreign portfolio investors (FPIs) made a sharp pivot in the Indian stock market, investing ₹11,113 crore over the past three trading days. This unexpected turnaround raises questions about whether FPIs are reassessing their India strategy.
A Roller-Coaster Ride of FPI Activity
Since October 1, FPIs have withdrawn a staggering ₹155,730 crore from Indian equities, driven by global and domestic factors. Key phases include:
- October 2024: ₹113,858 crore outflows via exchanges.
- November (up to Nov 22): ₹41,872 crore further equity sell-off.
Despite the prolonged exodus, FPIs injected ₹9,947 crore on November 25 and ₹1,157 crore on November 26, signaling cautious optimism. Market analysts, however, remain skeptical. “This isn’t a full-fledged comeback,” one analyst said, noting that year-end investor redemptions could prompt further selling.
Domestic Investors Play a Counter Role
Domestic institutional investors (DIIs) have provided a stabilizing counterforce, investing ₹30,042 crore in November and ₹107,254 crore in October. However, the past three days saw DIIs selling ₹7,516 crore worth of equities, underscoring the volatility in market participation.
Stock Market Gains Amid Turbulence
Amid FPI and DII flux, the Sensex has shown resilience:
- Since November 21: The benchmark index has surged by 3.98%, or 3,079 points, closing at 80,234.08.
- November 22: Sensex soared 1,961 points (+2.54%) to 79,117.11 despite FPIs withdrawing ₹1,278 crore.
Factors Driving FPI Selling
FPI selling has been fueled by three primary factors:
- ‘Sell India, Buy China’ Trade: This trend, however, appears to be waning.
- FY25 Earnings Concerns: Worries over corporate earnings have spooked some investors.
- ‘Trump Trade’ Dynamics: The U.S. market has become increasingly attractive due to expectations of lower corporate taxes, higher tariffs, and stronger dollar prospects under the new Republican administration.
What Lies Ahead for FPIs?
Market experts predict FPI outflows will taper off as:
- Large-cap valuations in India have moderated.
- Resilience in sectors like IT (supported by FPI buying) and banking (buoyed by DII interest) provides a cushion against volatility.
Maharashtra’s NDA Victory Adds Positive Sentiment
The decisive NDA win in Maharashtra has also been a market catalyst. “It’s positive for market sentiment,” said Manish Jain, Director of Institutional Business at Mirae Asset Capital Markets. “However, the focus will soon shift to corporate earnings, the Union Budget, and global factors.”
Global Trends Influencing FPI Movements
According to JM Financial, U.S. policies under the Trump administration may draw FPI attention away from emerging markets like India. Higher U.S. inflation, stronger economic growth, and rising interest rates could redirect FPI flows.
Conclusion
The Indian stock market continues to witness a tug-of-war between FPIs and DIIs. While recent FPI investments hint at renewed interest, global uncertainties and year-end dynamics will play a crucial role in shaping future trends. For now, the Indian market stands resilient amid external and internal pressures.
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