According to industry data released Saturday, FPIs have sold equities worth ₹32,684 crore through the stock exchange up to August 17 and invested ₹11,483 crore in the primary market and other categories. Industry experts point out that the trend may continue as India is now the most expensive market globally and hence, FPIs would sell off their holdings here to deploy in relatively cheap markets.
This may continue even if the market turns more optimistic on the back of reduced fears of a U.S. recession. According to Vipul Bhowar, Director Listed Investments at Waterfield Advisors, "Global concerns about the unwinding of the Yen carry trade, potential global recession, slowing economic growth, and ongoing geopolitical conflicts have all contributed to market volatility and a rise in risk aversion.".
Domestically, some FPIs could have taken a call to book profits after being net buyers in June and July. Mixed quarterly earnings and relatively high valuations have made Indian equities less attractive, says Bhowar. Despite these issues, the robust performance of the economy, including GDP growth, reduced fiscal deficit, manageable current account deficit, and strong sector and industrial production growth, lure many FPIs toward India. This indicates that FPI flows into India are likely to continue.
The primary market issues are offered at comparatively lower valuations, though the valuations in the secondary market are high. Therefore, most of the FPIs tend to buy when the securities are reasonably valued and sell when the valuations stretch in the secondary market.
In the last one year, FPIs invested more than ₹64,824 crore in the Indian share market. On a cumulative basis, FPIs invested ₹1,82,965 crore with total sell-off of ₹1,18,141 crore in the last one year, data from depositories showed.
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