FPIs offload IT, oil & gas stocks worth ₹13,734 crore in March; remain net sellers of Indian stocks for 2 years running

• The oil & gas sector saw foreign portfolio investors (FPI) outflows for the third consecutive month this year so far.
  
• Overall FPIs were net buyers in March with net investment in Indian equities at ₹7,936 crore.
  
• For the first time since entering India in 1992-93, FPIs have emerged as net sellers for two consecutive financial years – FY22 and FY23 accounted for a cumulative FPI outflow of ₹1.63 lakh crore.
  

Foreign portfolio investors (FPIs) extended their bearish stance on the oil & gas sector in March, marking the third consecutive month of outflows in the sector in the year so far. FPIs also turned bearish on the IT sector during the month — between these two sectors, they sold equities worth ₹13,734 crore.

Overall, FPIs were net buyers in March, largely due to the ₹15,446 crore investment by US-based investment firm GQG Partners in the Adani group. As a result, the net investment of FPIs in Indian equities during the month stood at ₹7,936 crore.

FPI flow trends saw a clear demarcation for the month – the first half of March witnessed FPI inflows of ₹12,575 crore, while the second half saw outflows of ₹4,636 crore.

That being said, FY24 is off to a positive start with FPI flows into Indian equities standing at ₹3,747 crore in April so far.

“The phase of sustained FPI selling appears to be over. Also, Indian valuations have turned reasonable now. More money is likely to flow into financials, capital goods, and autos and auto components,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

India’s benchmark indices had a rollercoaster March – the Sensex and the Nifty50 were down between 1.3% to 1.7% until the last day of the month. However, a last-day rally saw the Sensex end the month on a flat note, while the Nifty50 closed 0.3% higher.

For the first time ever, FPIs turn net sellers in two consecutive financial years

Since FPIs were allowed for the first time in 1993, this is the first time that they have been net sellers for two consecutive financial years.

According to data from the National Securities Depository Limited (NSDL), the net investments by FPIs in FY22 and FY23 were negative, recording outflows of ₹1.22 lakh crore and ₹40,936 crore, respectively.

FPIs have been investing in India since 1992-93, starting off with ₹13 crore in the first year. Since then, they have pumped ₹12.28 lakh crore into India. They have been net sellers in only 5 out of these 30 years.

FPIs created a record in FY21, the year of Covid, with investments of ₹2.67 lakh crore. However, they have pulled out a cumulative ₹1.63 lakh crore from India since then.

However, this FPI sell-off could now be over. “This is likely to reverse in FY24 since India has the best growth potential in FY24,” Vijayakumar added.

“Even though Indian valuations are relatively expensive, they have turned reasonable now and in tune with the long-term premium enjoyed by India,” he added.

Analysts remain bullish about the prospects of Indian equity markets. Global brokerage Goldman Sachs expects the Nifty50 to touch 20,000 in the next 12 months, thanks to double-digit earnings growth. Analysts at Morgan Stanley upgraded Indian equity markets to ‘equal-weight’ thanks to the resilient economy and reasonable valuations.

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