To be sure, among the 132 stocks with more than 20% FPI holding, 61 have declined between 5% and 20% last week.
All three broader indices – Sensex, BSE Mid-cap and BSE Small-cap – declined over 3.5% last week on concerns over inflation and the US Federal Reserve’s policy tightening.
FPI-heavy stocks were heavily sold. Stocks with more than 20% FPI stake, such as Mcdowell Holdings, Dr. Lal PathLabs, Info Edge India, PTC India, Metropolis Healthcare, HCL Technologies, PNB Housing Finance, Tata Communications, and Granules India, declined between 10% and 20%.
Emerging-market ETFs have specific allocation ceilings for India. Those investors in risk-off mode put in redemption orders and fund managers do not have a choice but to sell, said market participants.
“Passive money is getting withdrawn from the emerging markets including India influenced by US bond yield, Fed’s tapering decision, and expected rate hikes as a result of high inflation in the US,” said Ravi Sardana, an investment banker. “FPI-heavy stocks could be under pressure if FPI outflow intensifies.”
There are as many as 13 stocks where FPIs hold more than 40% stake. They include HDFC, ICICI Bank, Axis Bank, Zee Entertainment, Shriram Transport Finance, IndusInd Bank and Apollo Hospitals.
FPIs invested more than ₹80,000 crore in the initial public offers last year. Shares of Zomato and One97 Communications, the parent of Paytm, declined 15% each last week. FPIs held 11% in Zomato and 9.36% in Paytm. RateGain Travel and PB Fintech shares fell nearly 9% in the last five trading sessions. FPIs held 13% and 11% in these two stocks, respectively.
“There is a significant divergence in terms of how the flows are deciding the markets. Midcaps and small-caps with more large domestic flows are holding on whereas, on the large-cap side, the large part of the selling is by foreign institutions which are large shareholders in those stocks,” said Jinesh Gopani, head of equities, Axis Mutual Fund. “There are some jitters around passive flows and clearly, it is seen across the globe where more of the ETF kind of money is leading to this sell-off,” he added.
During the first fortnight of January 2022, FPIs sold IT shares worth ₹3,000 crore and ₹1,900 crore worth of shares from the retail sector.
