FPIS PULL OUT OVER ₹17,020 CR FROM EQUITIES IN JAN SO FAR. CAN BUDGET SPARK BUYING?

Foreign portfolio investors (FPIs) stayed as net sellers throughout the current week with January 27 witnessing the most selloff in the current month. On Friday, FPIs pulled out more than ₹5,970 crore from equities on the back of a broader bearish tone that was triggered due to the Adani crisis. In January so far, FPIs have been preferring much cheaper markets such as China Hong Kong, South Korea, and Thailand, while booking profits in India.

Dr.V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "Shorting India has been profitable for FPIs this month and the massive equity selling of ₹5977 crores in the cash market on 27th January also contributed to the market turmoil triggered by the ‘Adani crisis’."

In the cash market, Vijayakumar pointed out that foreign investors' total sell figure has reached ₹41,456 crore.

Geojit's strategist added, "This kind of massive selling along with the crash in Adani stocks has impacted the market sentiments temporarily."

Meanwhile, according to NSE data, foreign institutional investors sold ₹5,977.86 crore from Indian stocks on Friday, while domestic investors bought ₹4,252.33 crore. This would be the biggest selloff of FIIs in equities in the current month.

So far in January, FIIs selling is around ₹29,232.29 crore in equities. In the previous month, the outflow was approximately ₹14,231.09 crore.

Meanwhile, Sensex and Nifty 50 have declined by around 3% each so far in January.

On Friday, Sensex closed at 59,330.90 lower by 874.16 points or 1.45%. Nifty 50 shed 287.60 points or 1.61% to end at 17,604.35.

According to Vijayakumar, the FPI selling which started early in January gathered momentum towards the close of the month. FPI strategy in January has been selling in India and buying in relatively cheaper markets like China., Hong Kong, South Korea, and Thailand.

Equities are not alone, debt-VRR and hybrid markets have also seen FPIs outflow of ₹736 crore and ₹123 crore. Still, the equity market has continued to take the most beating. On the other hand, FPIs have emerged as net buyers in debt instruments with an inflow of ₹3,685 crore between January 1st to 27th.

Overall, in the Indian market (including equities, debt, debt-VRR, and hybrid), FPIs outflow stood at ₹14,196 crore --- some losses were offset by buying in the debt market.

A good budget may spark a healthy buying trend by foreign investors in Indian equities.

Vijayakumar said, "Since there has been no pre-budget rally this year, a good budget can trigger a post-budget rally."

While Manoj Purohit, Partner & Leader – Financial Services Tax, BDO India said, "Though recently there has been some net outflow in terms of FPI investment, foreign investors are still preferring the FPI route for their investments as India continues to be a preferred investment destination in terms of overall growth and stability. There has been overall development in the capital market like the stock exchanges moving to T+1 settlement, and SEBI introducing information database and repository on Municipal Bonds. Similarly, the fiscal budget 2023 is likely to provide further acceleration for the foreign investment inflows as demonstrated by the Government in its previous budgets."

Source: Livemint