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Foreign portfolio investors (FPIs) continue to be net buyers overall in the current month, however, in the last few days, money has been pulled out from equities. Market sentiment turned volatile due to fears of a global economic slowdown currently. Both Sensex and Nifty 50 tumbled more than 2% in the trading week from September 12-16. This month, as of September 16, FPIs' investment in the equity market stands at more than ₹12,000 crore. Foreign investors are expected to be on a wait-and-watch mode ahead of US Fed's policy meeting scheduled later this week.
Data from NSDL showed that FPIs are net buyers so far in September (up to 16th), with an inflow of ₹12,084 crore in the Indian equity market. They are also net buyers in debt and hybrid markets with an inflow of ₹1,777 crore and ₹268 crore respectively. However, FPIs are net sellers in debt-VRR instruments with an outflow of ₹1,225 crore.
Thereby, in the overall Indian market (including equity, debt-VRR, hybrid, and debt), FPIs have pumped in ₹12,904 crore so far in the current month.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, "A major factor supporting the recent rally in the Indian market has been the sustained FII buying that started in July and gathered momentum in August. FII buying continues in September also. As per NSDL data, FPI buying through exchanges in September up to 16th stands at ₹12084 cr."
However, Vijayakumar also added, "FPIs have turned sellers in the cash market in the last few days. They sold equity worth ₹3260 cr on Friday the 16th (provisional). This sudden large selling must have contributed to the sharp 1093-point crash in Sensex on the 16th. The global market situation has turned volatile on fears of global economic slowdown."
As per NSE data, on September 16, foreign investors (FIIs) pulled out ₹3,260.05 crore from the equity market --- higher than the outflow of ₹1,270.68 crore on September 15, and ₹1,397.51 crore on September 14.
In August month, FPIs made their biggest investment of the year. Inflow stood at ₹51,204 crore in the equity market.
Notably, in the first six months of 2022, FPIs were net sellers, and the outflow trend ended in July month. From January to June, FPIs pulled out a record ₹2,17,358 crore from the equity market. June saw the most selling in the year with an outflow of ₹50,203 crore.
Due to buying in the second quarter of FY23 (July to September 16), some outflows in the equities have been recovered.
Year-to-date (till September 16), FPIs outflow is now at ₹1,49,081 crore in the equity market. In the overall Indian market, the outflow is around ₹1,55,894 crore.
Going forward, Vijaykumar said, "FPIs are likely to wait and watch before resuming their buying in India."
According to Apurva Sheth, Head of Market Perspectives, Samco Securities, the FOMC meeting and press conference will be the centre of attention next week. Globally, Fed’s interest rate decision can trigger jitters in the markets. Given the US Fed’s hawkish stance, some people are expecting even a 100 bps rate hike. US markets already faced deep cuts when they reacted to the figures of headline CPI and core inflation for August’22. Although India has done significantly better than all the other major markets, it is expected to remain volatile.
FOMC is scheduled to meet from September 20-21. Majority are expecting 3rd aggressive rate hike to the tune of 75 basis points from the Fed to tame the multi-decadal high inflation rate.