FPIs have sold equities worth over ₹13,000 crore since September, with flows reversing after the last US Fed rate hike

• Foreign portfolio investors have sold equities worth over ₹13,000 crore since September so far.
• FPIs were largely positive till the third week of September, but the flows reversed on September 22, with an outflow of over ₹24,000 crore since then.
• IT, financial services, and oil & gas were amongst the sectors witnessing the most selling, together accounting for ₹21,949 crore of outflows.

Foreign portfolio investors (FPIs) have sold equities worth over ₹13,000 crore between September and October. The benchmark Nifty50 index declined 0.5% over the same period.

Interestingly, FPIs were largely positive for most of September – till September 21, the net flows into equities stood at ₹11,144 crore, with the Nifty50 index reporting a marginal 0.2% decline.

Since then, FPIs have sold equities worth over ₹24,000 crore, according to data from NSDL. It is worth noting that the US Fed announced a 75-basis point rate hike on September 21.

Foreign portfolio investment trends have once again become negative, reversing the strong equity inflows to the tune of ₹51,204 crore in August.


Here’s what FPIs have been buying and selling since September

Since the beginning of September, IT, financial services, and oil & gas were amongst the sectors witnessing the most selling – together accounting for ₹21,949 crore of outflows, according to data from NSDL.

However, the sell-off in the IT sector has cooled down from September levels – it was down to ₹1,665 crore in the first half of October from ₹9,199 crore in September.

On the other hand, outflows worsened in the financial services sector – while FPIs were net buyers in the first half of September, they began selling in the second half and that has continued in the first half of October as well.

This is in spite of banking majors like ICICI Bank, HDFC Bank and Axis Bank posting healthy earnings growth in the September quarter.

Rising bond yields expose banks to mark-to-market losses. “Hardening of government bond yields in the face of additional borrowing could result in mark-to-market losses for banks,” the Reserve Bank of India said in its financial stability report. India’s 10-year bond yields rose from 7.398% at the end of September to 7.442% on October 26.

In the last quarter ending June, SBI reported a ₹6,549 crore hit on its bond portfolio. At the time, it had also said that if the yields rose to 7.75%, it might have to make additional provisions of between ₹2,000-₹3,000 crore.

Bullish on telecom, healthcare and capital goods

Between September and the first half of October, FPIs remained most bullish on the telecom sector – which saw inflows of ₹2,587 crore.

FMCG, on the other hand, witnessed a reversal in flows between September and October 15 – while FPIs were net buyers in this sector at ₹2,765 crore in September, they offloaded ₹1,188 crore in the first half of October.


FPI assets under custody decline by ₹1.8 lakh crore in September

During September, the total assets under custody of FPIs fell ₹1.8 lakh crore, while the benchmark Nifty50 index declined 3.7% in this period.

US, Mauritius and UK-based funds sold the most, at ₹1.16 lakh crore.

Overall, listed funds pulled out $1.3 billion from India in the month, while other key emerging markets like China and South Korea saw inflows of $5.5 billion and $407 million, respectively, according to a report by Kotak Institutional Equities.

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