India’s Foreign Portfolio Investors (FPIs) marked the highest ever monthly sell-off and disbursed a whopping Rs 1,13,858 crore through the stock exchanges in the month of October. However, they remained active buyers in the primary market this month.
Contrary to the massive sell-off in the secondary market, the FPIs invested Rs 19,842 crore in the said period.
The duality in the behavior of FPIs is explained by Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stating that the primary market issues tend to have fair valuations while the benchmark indices trade at higher valuations.
However, this brutal selling has contributed immensely to the roughly 8% decline in the benchmark indices since the peak.
“Given the high valuations in India, FPIs could continue to sell, limiting any possible upside in the market,” Vijayakumar believes.
Another important trend observed in the sectoral movements is that the sector has been resilient since then despite the massive selling of FPIs in the financial sector. This is explained by the fair valuations in the industry and hence the selling is being absorbed by domestic institutional investors (DIIs) and individual investors, especially the high net worth individuals (HNIs).
Even India’s Asian rival China also appears to be returning under pressure as the rally in Chinese shares appears to have weakened, as reflected in the downtrend in the Shanghai and Hang Seng indices in recent days.
On a global level, markets will react to the US presidential election for a few days in the coming week, after which fundamental factors such as US GDP growth, inflation and Fed rate cuts will influence market movements.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times)
