The selling bias from foreign portfolio investors (FPI) continued to be stubborn as volatile markets amidst macroeconomic backdrops have dampened sentiments. FPIs have been pulling out their money since the very beginning of this year and the June month looks to be on a similar path. So far in 2022, FPIs removed more than ₹1.81 lakh crore in the equities market. However, the selling pressure trend is expected to calm down in the near term.
As per data on NSDL, FPIs pulled out about ₹13,888 crore so far in June from the equities market. Their outflow stood at ₹39,993 crore and ₹17,144 crore in May and April this year.
In the first two months of FY23 (April and May), FPIs have removed a whopping ₹57,137 crore from the equities market. The selling pressure is expected to continue even in June.
FPIs selling was massive in March to the tune of ₹41,123 crore after Russia invaded Ukraine which led the global equities market into a frenzy as commodity prices, crude oil prices, energy prices, and other consumer prices soared intensifying inflationary pressure.
The selloffs stood at ₹33,303 crore in January and ₹35,592 crore in February this year.
So far in 2022, FPIs carried an outflow of ₹1,81,043 crore in the equities market. This is massively high compared to the sellings in the debt market which is around ₹14,055 crore so far this year.
BSE Sensex and NSE Nifty 50 have dropped more than 8% each so far in 2022.
On Friday, Sensex settled at 54,303.44 down by a huge 1,016.84 points or 1.84%. Nifty 50 closed at 16,201.80 lower by 276.30 points or 1.68%.
When will FPIs’ selling bias calm down?
Vinod Nair, Head of Research at Geojit Financial Services said, “Till date, the monthly FPI net flows is negative in anticipation of a hawkish FOMC meeting. This selling can reverse if current & future policy measures announced are in-line with the market view and vice versa.”
Going forward, Nair said, “The domestic market will continue to be dominated by global trend & FPI selling may continue in the near term; however, we expect a moderation in FIIs selling during the short to medium-term.”
According to Nair, this is because a large part of the changeover like economic slowdown, hawkish monetary policy, supply constraints, and high inflation is factored in the market prices, which were consolidating over the last 7-months. And for the central banks to maintain the aggressive policy in the long-term the inflation must remain high. While the future inflation will depend on the developments of war & Chinese supply, which may relax in the short to medium term.