FPIs offload $2.2 billion in five days to mark their biggest selling in 16 weeks

The foreign portfolio investors (FPIs) continued to offload Indian shares, having sold shares worth $2.2 billion in five days through Friday. The selling continued on Friday as well, marking their biggest selling in 16 weeks.

Earlier, a five-day selling of this magnitude was seen during the week ended January 19, 2024, when they sold shares worth $2.4 billion, as shown by Bloomberg data.

On Friday, FPIs sold equities worth $254 million, and they remained net sellers during the last seven days. However, domestic institutional investors have absorbed most of it by acquiring shares worth a little over $2 billion during the week.

Apart from the concerns surrounding election results, the outperformance of Chinese and Hong Kong markets also weighed on FPI selling. The benchmark index of the Chinese equity market — Shanghai Composite — has gained as much as 4.5% during the last one month. Similarly, the Hang Seng of Hong Kong has rallied 13.4% over the last one month. That compares with a 2.1% drop clocked by the benchmark Nifty50 during the same period.

“So long as this outperformance of the Chinese and Hong Kong market continues, FIIs are likely to sell,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Moreover, the valuation gap between India and other equity markets have also widened off late. According to Bloomberg data, Nifty50 currently trades at 19.2 times its one-year forward earnings, whereas Shanghai Composite Index commands a valuation of 11.1x. Further, Hang Seng trades much cheaper at 9.2 times its 12-month forward earnings.

The ownership of FPIs has declined from its peak on the back of sustained selling and underperformance of some pockets due to cautious investment stance.

“Despite nominal capital inflows recently, FII have displayed a conservative approach, particularly toward sectors, such as the BFSI, where there has been significant retraction. Conversely, there is a slight increase in allocation toward commodity-oriented sectors albeit maintaining an underweight position,” wrote Elara Capital in a strategy note.

The Nifty50 closed Friday’s session at 22,055.20 points up 0.4%. The index has come off almost 2% during the weak to mark its biggest weekly fall in eight weeks.