Having off-loaded bonds worth over a billion dollars in September so far, foreign portfolio investors (FPIs) have now turned net sellers in the equity market. They have sold shares worth $1.31 billion, data from Bloomberg and provisional data from exchanges showed.
India’s stock markets have been weak for several months now with 70% of the stocks with a market capitalisation of Rs 1,000 crore and more in the red since January. Further, 87% of the Nifty SmallCap and 76% of the Nifty MidCap shares ended in red after Friday’s trading session.
Of the 735 companies in the universe of companies with a market-cap of Rs 1,000 crore and more, 399 have lost more than 20% of their value while 349 companies have lost more than 25%.
The Nifty MidCap Index has given up about 19 % since the start of the year whereas the Nifty SmallCap Index has plummeted 32.4% since January.
In the past three months, the FPIs had remained net sellers in August and June at $277 million and $376 million respectively. But in July they remained investors at $207 million. FPIs have dumped Indian bonds worth $1.36 billion in September so far (data till September 27). The total sales in the equity market, in September, around a week back amounted to something $533 million.
On a year-to-date basis (YTD), there was a total selling of $1.77 billion worth of equity, while the YTD selling in the Indian bonds were much larger at $7.01 billion. Recently, Goldman Sachs had downgraded India to market weight from overweight. “We believe the risk/reward for Indian equities is less favourable at current levels and we lower our investment view from overweight to market weight,” the investment banking firm wrote.
The investment bank noted that while earnings seem to be improving, it sees multiple macro headwinds for the market in the near term given moderating sequential growth, tighter financial conditions, rising oil prices, worsening current account deficit and a volatile rupee. It believes valuations are stretched and that there is the event risk of elections. Further, domestic inflows have slowed for four consecutive months. “Funds could potentially see lower equity inflows as the yield gap between equities/bonds has fallen to 10-year lows,” it concluded.
On Friday, the rupee closed at 72.49 against the greenback and since January, the rupee has lost nearly 12%. Noticeably, the US dollar Index – Dollex – has shot up by nearly 40 points from Thursday’s close to around 95.29 levels on Friday.
The weakening rupee could prompt foreign investors to offload more bonds, market observers said.