Foreign portfolio investors turn net sellers after nine trading sessions

Foreign portfolio investors (FPIs) have turned net sellers for the first time after nine trading sessions on Wednesday.

According to provisional data provided by stock exchanges, overseas funds were net sellers to the tune of Rs 919 crore. 

In the previous nine sessions, foreign institutional investors (FIIs) pumped in over Rs 24,000 crore ($3.2 billion), triggering a 12 per cent jump in benchmark indices. 

The entire amount hasn’t gone into buying stocks from the secondary market. A major portion of these flows has come on account of share sales in several bluechip stocks.

In November 2019, FPIs were net buyers for 11 straight sessions amid improvement in risk appetite on optimism around the US-China trade deal. Back then, they had invested around Rs 24,000 crore in those 11 sessions, helping the benchmark indices scale new record highs. Large long-term investors have been ma­jor participants in the share sales. But experts feel the flows into the secondary market could be on account of exch­a­nge-traded funds (ETFs) focus on emerging markets (EMs).

“Globally, the risk-on trade has moved towards EMs, thanks to inflows from passive funds. Global liquidity and risk on trade are stronger at the moment. The flows will continue until the central banks turn the tap off or when investors start fearing that the liquidity-driven rally has created too much risk. You don’t know what will pop the bubble,” says Andrew Holland, chief executive officer (CEO), Avendus Capital Alternate Strategies.

 

 

On an average, FPIs have invested over Rs 2,700 crore daily in each of the previous nine sessions. The surge in flows have coincided with the lifting of lockdowns in many countries across the globe. Also, more stimulus measures by central banks such as US Federal Reserve, Bank of Japan and European Central Bank boosted sentiment.

Abhiram Eleswarapu, head of equities, BNP Paribas India, said the surge in flows have been underpinned by lifting of lockdowns, pick in economic activity on the ground and improvement in liquidity.

Market players said it’s difficult to say if Wednesday’s selling is a minor hiccup or foreign investors have changed course. Interestingly, domestic funds have taken money off the table in the past fortnight, taking advantage of the surge in foreign inflows.

“Many domestic institutional investors believe the current recovery from the recent lows is not sustainable and based on technical factors. The thinking seems to be that the June quarter results will be abysmal and even the commentary will be pessimistic, which could lead to a slide in the markets. That seems to be the reason why domestic investors are selling whereas FPIs are guided by what is happening internationally, including the need to deploy excess liquidity,” said UR Bhat, director, Dalton Capital India.

Improvement in global flows have been witnessed since the beginning of April after a record pullout of nearly Rs 60,000 crore in March. This saw the benchmark indices crash nearly 25 per cent. The cumulative inflows since April are only half of the outflows seen in March. Market players said the liquidity-driven rally can be sustained if there is an improvement in economic outlook.