In November, foreign portfolio investors (FPIs) pulled out a net of Rs 3,765 crore from Indian equities, which is opposite to the net inflow of Rs 14,610 crore in the same month. The fall came after three months of outflow in July, August, and September, which is due to global uncertainty and high domestic valuations. According to depository data, FPIs offloaded Rs 23,885 crore in September, Rs 34,990 crore in August and Rs 17,700 crore in July.
According to market analysts, global risk-off sentiment, instability in technology stocks, and a preference to invest capital in primary markets rather than secondary markets all contributed to the November outflows.
Uncertainty about when the US Federal Reserve will reduce its interest rates, combined with a strong US dollar, contributed to the cautious attitude of investors. Himanshu Srivastava, Principal and Manager of Research at Morningstar Investment Research India, pointed out that geopolitical unrest and unpredictable crude oil prices have increased risk aversion. There was pressure on emerging markets, such as India, where investors sought safer assets amid global volatility.
The technology sector was experiencing pressure to sell because investors were withdrawing their investments from the industry due to poor performance in the sector and the global economy. The moderate declines in the consumer services and healthcare areas supported these trends.
Domestically, investors lost confidence in Indian companies due to optimistic valuations in specific industries and poor industrial performance, despite the healthy fundamentals of the Indian economy. According to Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, the outflows in November were primarily driven by international risk aversion and local sector volatility.
However, according to some analysts, the negative trend may come to an end. V. K. Vijayakumar, Chief Investment Strategist at Geojit Investments, also noted the reversal of buying and selling patterns by FPIs, suggesting that future flows may change depending on new situations. The market mood rebounded after a November 27 rally, during which the Nifty and Sensex peaked after a fourteen-month hiatus, driven by improved Q2 corporate earnings and more optimistic projections for Q3 and Q4.
In the future, FPI activity during December is likely to be influenced by the potential for US Federal Reserve rate reductions and the progress of the India-US trade agreement. Denomination FPIs have extracted more than Rs 1.43 lakh crore of Indian equities. FPIs, on the other hand, had invested Rs 8,114 crore in the general limits and withdrawn Rs 5,053 crore under the voluntary retention route in the debt market.