Selling by FPIs contributing to the volatility in Indian markets

New Delhi [India] June 9 : Despite continues selling by pressure by Foreign Portfolio Investors, Indian markets at all-time high.
The BSE Sensex touched an all-time high on Friday, while the Nifty 50 index closed positively at 23,267.75, marking a gain of 446.35 points or 1.96 percent, and hitting a high of 23,320.20.
However, the Foreign Portfolio Investors are net sellers in Indian markets for the third consecutive month in June.
According to the NSDL (National Securities Depository Limited) website, FPIs have offloaded equities worth over Rs 14,794 crore in the equity markets so far this month. This follows a similar trend from last month when foreign investors were also net sellers, leading to heightened volatility in the Indian markets.
"FPIs regard Indian valuations to be very high and, therefore, capital is getting shifted to cheaper markets. The FPI pessimism regarding Chinese stocks appears to be over and there is a trend of investing in Chinese stocks listed in the Hong Kong Exchange since the valuations of Chinese stocks have turned very attractive" said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
In May, FPIs sold equities worth Rs 25,586 crore as per NSDL data, indicating a pattern of sustained and excessive selling in the cash market.
For the year 2024 so far, FPIs have divested equity worth Rs 38,158 crore. A notable trend in FPI activity is the considerable selling through exchanges while simultaneously buying through the primary market route.
The market is gradually stabilizing following the high volatility triggered by the election results, including both exit polls and the actual outcomes.
Market experts highlight the high valuations of Indian stocks, particularly in the broader market. These high valuations are likely to attract further selling by FPIs in the future.
The budget will also give a policy direction of the new government and market will adjust itself as per budget announcements
The pattern of FPIs being net sellers extends back to April as well. During that month, the geopolitical crisis in the Middle East prompted investors to withdraw funds from their portfolios.
Despite being net buyers for the first three months of the year until mid-April, FPIs cumulatively sold stocks worth Rs 8,671 crore by the end of the month.
Overall, the selling by FPIs is contributing to the ongoing volatility in the Indian markets. The perception of high valuations in Indian equities, coupled with attractive valuations in other markets like China, is driving this trend.
As FPIs continue to adjust their portfolios in response to global market conditions and geopolitical developments, the Indian markets are likely to react accordingly.