Foreign institutional investors (FIIs) continued their selling spree, offloading an additional Rs 19,994 crore of shares in November following the Rs 94,000 crore sellout in October. This brings their total outflow to Rs 1.14 lakh crore in 28 trading sessions.
Following the outflow, the benchmark equity index BSE Sensex retreated nearly 6 percent, or 4,813 points, to 79,486 on November 8 against the 84,200-mark on September 30, 2024. Meanwhile, the Q2 earnings season also disappointed D-Street with more companies missing expectations than beating them.
Manoj Purohit, Partner & Leader, Financial Services Tax, Tax & Regulatory Services, BDO India highlighted that despite the ongoing outrage of funds since last month, November saw unprecedented applications of about 40-50 new FPI registrations, which are eyeing to enter the Indian market.
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“All thanks to SEBI’s recent relaxation to NRIs, permitting them to participate up to 100% and announcing measures for ease of entry and operations in India,” Purohit said.
He added that though the FPI community had been very cautious about Indian markets in the last couple of months, shifting their allocation to other countries like China; India still stands on better footing than other markets. The major factors attributable are political certainty, long-term growth, better yields, substantial capex spending by the government, and last but not least, the central bank’s vigilant approach while announcing rate cuts to check on inflation.
“The offshore participants are optimistic that the RBI will adopt a balanced approach to ensure the cost of raising funds is under control and is made easily accessible to India Inc. in the upcoming quarter’s announcement,” said Purohit.
Additionally, he believes that the outcome of the recent election results held in the US has created optimism for the Indian market considering the strategic partnership between the two countries.
“This will boost the economic and mutual businesses and other foreign trade policies which will make India more lucrative for foreign investments. We may see the upside in FPI’s inflows in equity and debt segment turning in green in the coming few trading cycles,” he said.
On the other hand, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services added that the rationale for the FII selling is, the elevated valuations in India which appear conspicuous in the context of the earnings deceleration evident in the Q2 numbers.
“The FII selling trend is likely to continue in the near term till data indicate the possibility of a trend reversal. If the Q3 results and leading indicators reflect a recovery in earnings, the scenario can change with FIIs reducing selling and even turning buyers. Investors will have to wait and watch for the data. Meanwhile, investors can consider shifting some money from the overvalued mid and smallcaps to quality largecaps,” Vijayakumar said.
