FPIs stage a comeback in December, infuse ₹24,454 crore into Indian equities; Is the sell-off over?

Foreign portfolio investors (FPIs) took a sharp U-turn and turned net buyers in the first week of December, snapping their robust two-month selling streak over global cues. D-Street experts believe the trend reversal is a clear strategy for foreign investors to bank on year-end profits in the Indian stock market.

FPIs were net sellers in Indian markets last month amid the uptrend in the US market and US bond yields, fueled by Republican Donald Trump's victory in the US presidential elections and the US Federal Reserve's interest rate cut verdict. However, the US Fed has clarified there is no hurry to cut rates.

FPI sell-off hit a record high in October amid ongoing geopolitical tensions in the Middle East and cheaper valuations in the Chinese stock market. FPI outflows recorded in October 2024 were the highest ever in a single month in Indian markets. October's FPI outflow hit a 10-month high, the highest sell-off from the Indian market year-to-date (YTD).

FPIs snap two-month selling streak

According to the National Securities Depository Ltd (NSDL) data, FPIs invested ₹24, 454 crore worth of Indian equities this month, and the net inflows stood at ₹34772 crore as of December 6, taking into account debt, hybrid, debt-VRR, and equities. The total debt investment is ₹355 crore so far this month.

"In December, through 6th, FIIs have turned buyers, having bought equity for ₹17921 crores through exchanges. Including the purchases through the primary market, the total FIIs buying through 6th December stand at ₹24,453 crore," said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Is the FPI sell-off finally over?

According to Dr. V K Vijayakumar, the current trend reversal is a clear change in India's FII strategy. “It can be argued that the stage of relentless FII selling is over,” said the market expert. “FIIs turning buyers in early December, in total reversal of their sustained selling strategy during the last two months, has altered the market sentiments.”

In October, foreign institutional investors (FIIs) sold ₹1,13,858 crore through exchanges. In November, the amount declined to ₹39,315 crore. According to the expert, the FII strategy change is reflected in stock price movements, particularly in large-cap banking stocks where FIIs have been sellers.

“This segment has further room to increase since it is fairly valued and growing reasonably. More domestic institutional and retail money is likely to move into this segment. Information technology (IT) is another segment likely to do well and attract more FII buying,” added Dr. V K Vijayakumar.

FII selling in November was lower than that of October, which can be partly attributed to the reduced valuations caused by the market correction. However, market analysts noted that despite the sell-off in equities, the trend of FII buying through the primary market continued in November.

In November FIIs bought stocks for ₹17,704 crore through the primary market. “If we take the period up to November 29th 2024 the total FII selling for the year stands at ₹1,18,620 crore. During this period FIIs bought equity for ₹1,03,601 crore through the primary market. The reason for this dichotomy is the high valuations in the secondary market and the reasonable valuations in the primary market,” said analysts at Geojit Financial Services.

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