This sharp withdrawal in November was Rs. 3,765 crore followed by net outflows, adding pressure to domestic equity markets.
The current trend comes after a brief hiatus in October, when foreign portfolio investors (FPIs) poured in Rs 14,610 crore, snapping a three-month streak of heavy withdrawals. FPIs in September raised Rs. 23,885 crore in August, Rs. 34,990 crore and in July Rs. 17,700 crore equity was sold.
According to National Securities Depository Ltd (NSDL) data, FPIs withdrew Rs 17,955 crore from Indian equities between December 1-12.
Market experts have attributed the steady outflows to several factors, including the sharp depreciation of the rupee and the affluent Indian valuation.
Explaining the outflows, Himanshu Srivastava, Principal Manager Research, Morningstar Investment Research India, said higher US interest rates, tight liquidity conditions and preference for safer or higher-yielding developed-market assets weighed on investor sentiment.
Adding to the pressure, India’s relatively rich equity valuations make it less attractive compared to other emerging markets that currently offer better value, he added.
Apart from these concerns, Angel One Senior Fundamental Analyst Wakarjaved Khan pointed to weakness in the Indian rupee, global portfolio rebalancing, year-end effects and lingering macroeconomic uncertainty as the main reasons behind the continued drag.
Despite this continued foreign selling, the impact on markets has been largely offset by strong domestic institutional investor (DII) participation. DII has during the same period Rs. 39,965 crore invested, effectively absorbing FPI outflows.
Looking ahead, some market experts believe that the selling pressure may ease.
VK Vijayakumar, chief investment strategist at Geojit Investments, noted that the continued sell-off seems unsustainable given India’s strong growth and earnings outlook, suggesting that FPI sales are likely to taper off going forward.
Khan added that a swift US-India trade deal could potentially lead to a reversal in foreign investment trends.
Meanwhile, in the debt market, FPIAs under the normal limit of Rs. 310 crore was withdrawn but during the same period through voluntary retention route Rs. 151 crore was invested.
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