With foreign portfolio investors (FPI) selling close to $2 billion worth of equities in last eight sessions, the markets have lost nearly 4% in August. On Tuesday, FPIs sold equities worth $129 million, provisional data on exchanges showed. FPIs have sold shares worth $1.89 billion in August so far with net investments standing at $7 billion so far this year, amid concerns over geo-political tensions, steep valuations and tepid growth in earnings of the companies in the recently concluded results season. The selling in August is the highest monthly outflow since November 2016. The Sensex at current levels of 31,291.85, trades at a price-earnings multiple of over 18.5 times one-year estimated forward earnings, a 20% premium to the long-term average multiple.
Barring three, overseas investors remained net sellers in all sessions in August. Market participants said that there is a state of exhaustion amongst investors about the Indian and the global market. They said if the investor exhaustion accelerates further then there could be a deeper correction in the market. “Liquidity is pushing the markets higher, the earnings are bad and there are problems in different sectors,” said Andrew Holland, CEO at Avendus Capital Alternate Strategies.
He added that the selling could be an attempt to take some money off the table. Holland said selling pressure will continue in IT, pharma and stocks of certain PSU banks in the near future. Among the emerging markets (EMs), India witnessed highest outflow of $1.89 billion in August, followed by South Korea which saw an outflow of $1.3 billion during the month. FPI sales in Taiwan and Indonesia are relatively smaller, where foreign investors sold $651 million and $320 million, respectively.