FPIs return as net sellers with an outflow of ₹7,624 crore from equities in September

NSDL data revealed that FPI stood on the outflow 7,624 crore in the equity market in September. while the money ran out equitiesBecame net buyers in the debt market with the influx of FPIs 4,012 crore.

In August, FPIs made their biggest purchases of the current year with inflows 51,204 crores. FPIs were net buyers in the first two months (July and August) of the second quarter of FY23.

Overall, the selloff in September is much lower than the first six months of 2022. Between January and June, FPIs pulled out a record. 2,17,358 crore from the equity market. Currently, the year witnessed the highest sales with outflows in June 50,203 crores.

Year-on-year, FPI outflows are up 1,68,789 crore from the equity market.

These foreign investors have made outflows when it comes to FIIs, according to StockAge data. 18,308.30 crore in September from domestic equity. In August, the influx of 22,025.62 crore was registered.

Last week, the major focus was on RBI’s policy. In the September 2022 policy, the central bank raised the repo rate by 50 basis points for the third time in a row – taking the key rate to 5.9%. So far in FY23, the RBI has hiked the repo rate by 190 basis points in four consecutive hikes.

Meanwhile, the MPC decided to focus on the return of housing to ensure that inflation remains within the target while supporting growth. The RBI continues to see India’s economic growth at 7% for FY23, while they have set an inflation target of 6.7% for the overall fiscal year.

Indian markets on Friday reacted positively to RBI’s fourth hike. Domestic stock markets ended a 7-day run. The Sensex closed at 57,426.92, up 1,016.96 points or 1.80%. The Nifty 50 closed at 17,094.35, up 276.25 points or 1.64%. While the rupee strengthened slightly against the US dollar, outflows of foreign investors also registered a slowdown.

What to expect from FPIs in October?

For his October 2022 insights report, Dr VK Vijayakumar (Chief Investment Strategist) of Geojit Financial Services explained that it is important to understand that Retail/DIIs are now the dominant players in the market. Retail investors, DIIs and FPIs account for 52%, 29% and 19%, respectively, of the daily cash market volume on exchanges. Retail/DIIs are in a formidable position compared to earlier when FPIs used to call the shots. Retail investors are buying every fall in this market and DII is short of funds

Absorbing heavy selling by FPIs. This new market paradigm has changed the rules of the game.

Vijayakumar said, “If we take the period from July 2021 to June 2022, the FPI sold equity value 4,09,221 crore through stock exchanges. This heavy selling did not affect the market much as the period saw buying of DII 3,28,493 crore (Source: NSDL). The number of demat accounts increased from 40.9 million in March 2020 to over 100 million in August 2022, reflecting unprecedented retail investor enthusiasm. It has put the market in a good position.”

Geojit’s strategist believes that FPIs have learned that exiting the Indian market is easy but entry is difficult and costly. “When FPIs try to buy 5% of the shares they have sold, the prices go up, making their re-entry into the market costly,” he said.

“India has the best growth and earnings story among the world’s major economies, at least for the next few years. That’s why.

FPIs are now buying in India even though the US 10-year bond yield is above 3.4% and the dollar index is hovering around 110.

Further, Vijayakumar said, “There is global consensus that this year and next year, India will be the fastest growing large economy in the world. India’s GDP is expected to grow by around 7% in FY23 and 6.4% in FY24.” India’s corporate earnings are on an upswing. Corporate profits in GDP which recently touched a trough of 2% are now above 4% and are on track to surpass 6% during the next 3 to 4 years This will result in an explosive growth in profitability resulting in increased FPI inflows into India.”