Foreign investors shift gears: FPIs turn net sellers in Indian equities after seven-month buying streak

As the month of September draws to a close, Indian equities find themselves facing an unusual scenario - Foreign Portfolio Investors (FPIs) have turned into net sellers for the first time in seven months. The exit of foreign investors from Indian markets has been driven by several factors, including rising bond yields and the allure of a stronger US Dollar.

So far this month, FPIs have withdrawn over $1.5 billion from Indian equities, marking a significant shift from their previous buying spree. According to Bloomberg data, FPIs had collectively poured $21.3 billion into Indian shares between March and August, with a significant portion of these inflows attributed to Exchange-Traded Funds (ETFs) and increased secondary sales.

One sector that has witnessed FPI profit-taking is the power sector, with stocks like REC and PFC reaching record highs. Between September 1-15, FPIs sold power sector shares worth $500 million, a notable contrast to the $1.4 billion they invested in these stocks the previous month.

Metal stocks, on the other hand, continue to experience selling pressure due to a stronger US Dollar and a sluggish Chinese economy. In the first half of September, FPIs sold shares worth $549 million in the metal and mining sector, following nearly $840 million in sales during August.

Despite the sector-specific profit-taking, FPIs are maintaining their faith in the financial services sector, with investments totalling $772 million in the first half of September. This sector accounts for more than one-third (33%) of FPI investments, followed by IT (10.04%) and Oil & Gas (8.68%).

As of September 15, FPIs' Assets Under Custody (AUC) stood at $666.3 billion, equivalent to approximately 18% of India's overall market capitalization. In comparison to other emerging markets, Taiwan witnessed the largest outflows in September, amounting to over $5.5 billion.

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