₹11,500cr outflow in January: Why FPIs are selling Indian equities
What's the story
Foreign portfolio investors (FPIs) have maintained their selling spree in India's stock market into the new year, dumping shares worth nearly ₹11,500 crore or $1.33 billion in the first six trading sessions of January.
This follows a similar trend in October, November, and the second half of December last year.
The continued sell-off is due to fears of India's deepening economic slowdown and muted December quarter earnings expectations.
Market influences
Global factors influencing FPIs's selling trend
The selling trend is also affected by global factors like uncertainty over US tariffs under President-elect Donald Trump's administration and the rising cases of the HMPV virus.
In December, FPIs withdrew ₹2,590 crore from secondary markets while investing ₹18,000 crore in primary markets.
November witnessed more aggressive selling with ₹39,300 crore offloaded in secondary markets and an investment of ₹17,700 crore made in primary markets.
Investment approach
FPIs's strategy and market performance
The market rebound in early-January gave FPIs an opportunity to further intensify their sell-off, strengthening their "sell on rise" strategy.
Till January 8, both Sensex and Nifty have risen just 0.1%, while BSE MidCap fell 1.7% and BSE SmallCap 1%.
Meanwhile, domestic institutional investors (DIIs) have invested over ₹12,600 crore during this period with retail investors adding more than ₹2,770 crore.
Market outlook
Expert views on FPIs's cautious approach
Rajesh Palviya of Axis Securities says FPIs are keeping a close watch on corporate earnings and macroeconomic data.
He thinks their cautious stance is here to stay amid uncertainties over Trump's tariff policies, the upcoming Indian budget, and rising HMPV cases in China.
The Indian government's latest economic forecast estimates GDP growth at 6.4% for the current fiscal year, the slowest pace in four years, indicating a return to pre-COVID growth levels.
Growth projections
Global institutions' predictions for India's growth trajectory
Major global institutions have made different predictions for India's growth trajectory.
The International Monetary Fund expects an average growth rate of 6.5% over the next few years, while the World Bank estimates 6.7% and Goldman Sachs predicts a more conservative 6% growth for the fiscal year ending in March.
Nuvama Research recently flagged a continued earnings slowdown in Q3FY25 with muted top-line growth (8% YoY) for the seventh consecutive quarter and fading margin tailwinds, leading to sub-10% YoY profit growth.