In the last 15 years, there have been only three instances when the 12-month rolling average was more than ₹50,000 crore. FPIs have been net sellers of Indian equities for the fifth month in row, taking the total tally to $13 billion (₹1.04 lakh crore).
According to Credit Suisse, FPIs selling in the last 12 months as a percentage of the market-cap too slipped to a record low, and the elevated implied volatility suggests that it is not over yet.
Indian equities are quite close to entering technical correction limit of 10%. This has reduced the valuation premium of Indian equities to slip close to one standard deviation to its mean.
So far in February, FPIs have pulled out $4.1 billion (₹31,158 crore) while gross purchase has dropped to the lowest in 20 months. Consequently, the gross purchase to sell ratio of FPIs fell to 0.80, the lowest since March 2020.
The relentless selling by FPIs has shrunk their equity asset under management to $625 billion, the lowest since August 2021. FPIs’ equity lowered by 9% from the peak level in November 2021. FPIs’ selling appears to be accentuated in the stocks beyond Nifty 50, as the correction in the stocks excluding the Nifty 50 is significantly higher than the broad index.
The impact of intense selling by FPIs has been significantly contained by the buying support from domestic investor, particularly from insurance companies, in February. Insurance companies have bought equities worth $3 billion (₹21,000 crore) in February so far and domestic funds deployed more than ₹10,000 crore in the same period. Domestic MFs’ total 12-month cumulative inflow in equities reached ₹1.40 lakh crore, the highest since January 2018.
