The tug of war

Beyond a near-term reversal, foreign selling and domestic buying of Indian equities may resume

Foreign portfolio investors (FPI) have turned net buyers of Indian equities in the last two weeks after 10 consecutive months of selling. The cumulative outflow during this period has been $33 billion, pushing FPI ownership of the BSE500 to 18 per cent, the lowest since 2012. FPI selling has been broad-based from emerging markets (EMs), with the outgo from several markets as a proportion of market capitalisation the worst since the financial crisis 14 years ago, but India is among the worst affected.

After a wave of heavy selling, markets tend to see a bounce, and we are in the midst