FPI/FII Exiting At A Rapid Rate: Know When Foreign Inflows Will Normalise

International Investment
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FPI/FII Exiting At A Rapid Rate: Know When Foreign Inflows Will Normalise

Foreign Institutional Investors and Foreign Portfolio Investors are rapidly selling in the Indian Market, Know why and when it will normalize.

The Year 2024 till now has remained a very volatile year for the Indian Market due to various Domestic and International cues. From the beginning of this year, FIIs have been in high-sell mode in the Indian market, In the past 5 sessions FII/FPIs have sold net Rs.20,000 crores worth of positions.

Reasons For This FII Sell-Off:

The FII sell of in this year have been due to a combination of multiple factors:

  1. Weak Q3 Results
    Weak Q3 results by Major Indian Banks like Hdfc Bank, were the primary reason for FII sell-off started from the Indian market, During Q4 2024, FII trimmed their stake in Hdfc Bank to 47% from 52%. Also in Q1 Nifty 100 stocks showed growth of approximately 30% which further decelerated to 20% in Q3, why would FII pay a premium for stocks, If growth is slowing down.

  2. High US Treasury Yields
    The market was expecting rate cuts from the US Fed reserve which are now coming down. The results of this have led to a spike in Treasury yields as interest rates are going to be higher for some more time. Which attracts FIIs towards Bonds.

  3. Current Geopolitical Tensions
    The current Geopolitical tensions in the Middle East between Israel and Iran have also led to a decline in the markets across the globe due to a sharp increase in the price of commodities.

  4. Upcoming Lok Sabha Elections
    FIIs often pull off their stake during the election time as they prefer stability and during the election time there is uncertainty regarding various future policies and governance and also any change in leadership can unsettle the preferred stability. Also, Elections can create more volatility in the Indian Markets as investors react to opinion polls during that time so this may also hamper the risk perception of Fiis. so they try to reduce some of their stake until the political uncertainty stabilises.

When will Things get cool down from the FII side?

With current statements of the Fed Reserve about rate cuts, ongoing geopolitical tensions and upcoming elections the volatility is bound to remain in the Indian market and the existing pressure from FIIs may continue until these things get back to normal.

Conclusions:

The markets are severely impacted by ongoing geopolitical tensions in the Middle East and FII selling is one of the reasons why Indian markets are not able to scale further ahead. On the other hand, Local Funds are continuously supporting the Indian Market by infusing more and more money.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations.It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.