MUMBAI: The Indian stock markets are currently navigating a tumultuous phase, characterised by consistent selling pressure from foreign portfolio investors (FPIs).
Data from the National Securities Depository Ltd (NSDL) indicates that FPIs have divested equities worth an alarming Rs19,994 crore within the first five trading sessions of November alone.
The trend exacerbates concerns regarding the stability and resilience of the Indian equity markets.
The situation escalated sharply on a single day last Friday, when foreign investors offloaded shares worth Rs5,635 crore. This wave of dispossession has significantly impacted major Indian indices, with the Nifty 50 and Sensex experiencing declines of approximately eight per cent since the onset of this selling spree in October.
Notably, October marked a record for foreign selling activity, with FPIs channeling Rs1,13,858 crore out of the exchanges, reflecting a stark shift in investor sentiment toward Indian equities.
Despite this pronounced selling trend in the secondary market, it is crucial to highlight that FPIs have not entirely withdrawn from the Indian economic landscape. Instead, they have actively participated in the primary market, making selective investments in initial public offerings (IPOs) and other promising sectors.
In October, FPIs invested Rs19,842 crore in these opportunities, signaling their sustained interest in specific areas of the market.
Uncertainty prevails
Experts suggest that the volatility affecting Indian stocks may persist in the near term as foreign investors recalibrate their portfolios.
The recent declines in the Shanghai and Hang Seng indices hint at a potential slowdown in the rally of Chinese stocks, further complicating the outlook for the Indian markets.
Elevated valuations in Indian equities may prompt continued FPI sell-offs, which could limit any potential upward mobility for major indices. Interestingly, despite substantial selling in the financial sector, it has displayed resilience, with domestic institutional investors (DIIs) and high-net-worth individuals (HNIs) absorbing much of the selling pressure.
The ongoing divestment by FPIs has injected an unprecedented level of uncertainty into the Indian equity markets.
Industry experts and analysts remain vigilant, scrutinizing the situation for signs of stabilization as DIIs work to counterbalance the outflows.
The shift in investor sentiment raises critical questions about the near-term outlook for the Indian stock markets and their capacity to recover from recent downturns.
