FPI selling in Indian stocks moderates in first half of February

FPIs sold shares worth 48.06 billion rupees ($580.86 million) in the first half of February. FPI selling in Indian stocks had hit a seven-month high of 288.52 billion rupees in January due to the reallocation of funds to China and Taiwan and the uncertainties from a sharp selloff in Adani Group shares after a report by a U.S. short-seller Hindenburg Research flagged concerns over the conglomerate’s financials.

The moderation in FPI selling comes as the valuation gap between India and China normalised. The Indian market’s premium to China is back in line with the 10-year average at the end of January, Christopher Wood of Jefferies said in his latest weekly newsletter GREED and fear.

WHAT FOREIGN INVESTORS SOLD & BOUGHT
FPIs sold 62.63 billion rupees worth of shares in the oil and gas sector besides turning net sellers in power and metals.

FPI selling in financials reversed course in February, with foreign investors picking up stocks worth 23.68 billion rupees after offloading 152.04 billion rupees in January. Information technology also saw renewed interest from FPIs.

Financials remain attractive with their strong earnings, credit metrics, and improving asset quality, two analysts said, adding that information technology stocks after the recent correction are available at favourable valuations. The IT index has lost nearly 20% compared to a 3% rise in the Nifty 50 index since the start of 2022.

India’s benchmark Nifty 50 rose 2% in the first half of February, as FPI selling pressure moderated and domestic investors continued to support the markets.

Contributions to Systematic investment plans (SIPs) – in which domestic investors made regular payments into a mutual fund, hit 1.5 trillion rupees in the last 12 months, cushioning the impact of FPI outflows of 1.17 trillion rupees, according to Association for Mutual Funds in India.