Foreign investors sold shares worth over a billion dollars in the last four trading days⁠ while India was unveiling its ₹20 lakh crore stimulus

• Despite Indian government’s efforts to restart the Indian economy, foreign portfolio investors (FPIs) have exited the Indian markets in droves.
• Over 90% of the total ₹9,600 crore FPI sell-off in May has happened since Narendra Modi’s announcement of ₹20 lakh crore package on May 12.
• Global investment banks Nomura and Goldman Sachs have predicted that the Indian GDP will fall by 5% in 2020.

Foreign portfolio investors (FPIs) remain unimpressed with Narendra Modi government’s ₹20 lakh crore stimulus package for India Inc. Since the May 12 announcement, FPIs have sold ₹9,000 crore in cash stocks in the Indian markets.

According to data obtained from stock exchanges, FPI selling activity picked up steam on May 12 when PM Modi announced a ₹20 lakh package to restart the Indian economy.

“With the fifth and final economic package announced, no silver bullets to be found,” said global investment bank Nomura in its latest report dated May 17.

India may see a “deeper recession” in the short term

Global investment bank Goldman Sachs said that most of the reforms announced by the Indian government will have an impact in the medium term while the short term may see a "deeper recession", and added that the country's real GDP growth may fall 5% in the current financial year ending March 2020.

Echoing similar sentiments, Nomura said, “The government has used the cover of the COVID-19 crisis to plough through long pending, politically sensitive structural reforms. As a result, the package may fall short of mitigating the near-term existential crisis for businesses and workers, but it is better designed to improve India’s medium-term growth potential and attract long-term risk capital.”

“As a consequence, we maintain our GDP growth projection for 2020 at -5% year-on-year,” Nomura added further.

Barring investment in Hindustan Unilever, FPIs have been bearish on India in May

According to data obtained from the stock exchanges, GlaxoSmithKline sold ₹27,937 crore worth of Hindustan Unilever (HUL) stock in bulk deals on May 7. However, It is likely that most of that was French investor Societe Generale buying shares of HUL from GSK.

On this day, FPIs poured in more than ₹19,000 crore (approx. $2.53 billion) into the Indian market, while Domestic Institutional Investors had a net buy of more than ₹3,800 crore.

“Data speaks. FPIs went on a massive selling spree since May 12 and slammed the markets on the economic package announcement,” Deepak Sawhney, an independent data analytics expert told The Hindu BusinessLine.

Overall, barring the investment in Hindustan Unilever on May 7, FPIs have sold more than ₹9,600 crore in Indian stocks in 10 trading sessions. More than 90% of this selling has happened since PM Modi’s ₹20 lakh crore stimulus package announcement.

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