Indian equity markets witnessed steep selling by foreign portfolio investors (FPIs) as benchmark indices crashed on Monday. As per provisional data from stock exchanges, FPIs sold cash equities worth $792 million, making it the worst single-day sale since July 2013.
FPIs have been wary since the beginning of August and been net sellers in the last four sessions. Over the last week alone, they have pulled out $537.68 million. Year-to-date net inflows — which touched $7 billion in July — were down to $6.45 billion, Bloomberg data showed.
Dealing room checks indicated basket selling by some large foreign institutions, which triggered deep cuts across the board. While FPIs would be more cautious in the near future — especially after the rout on Monday — they would continue to invest in Indian markets, said experts.
“I think it is unfair to judge a market based on a single-day performance. If we consider year-to-date performance, Indian markets have outperformed their emerging market peers,” said Andrew Holland, CEO, Ambit Investment Advisory.
He said Indian stocks would continue to outperform and attract FPI inflows. “The intense selloff by FPIs is unlikely to continue for a long time as FPIs are confident about earnings from the Indian markets,” he said.
Inflows from domestic institutional investors(DIIs), on the other hand, have been positive. On Monday, DIIs purchased equities worth R4,097.83 crore, helping the stock market recover partially from FPI outflows.
DII inflows during the first seven months of CY15 stood at R27,623.24 crore, the highest in the last eight years, led by mutual funds, which have received consistent inflows from retail investors in the last one year.
As per Association of Mutual Funds in India (Amfi) data, equity mutual funds have seen inflows for 14 straight months in June, with inflows of over R32,200 crore in April, May and June together.
“The markets have witnessed an increase in inflows from DIIs. In fact,DIIs are the major reason behind the rally of mid-cap stocks in the recent past,” said Prabhat Awasti, head of equity & MD, India, Nomura Financial Advisories & Securities. He said DIIs would help India sustain FPI outflows in case of an interest rate liftoff by US Fed later this year.