Foreign portfolio investors (FPIs) began 2025 with a sell-off, withdrawing domestic funds worth Rs 4,285 crore on a net basis in the first three trading days of the new year amid a strong dollar, higher US bond yields and caution ahead of the release of quarterly results. third of companies.
In the debt market (general limit) as well, foreign investors sold Rs 1,111 crore on a net basis between January 1 and 3, National Securities Depository Ltd (NSDL) data showed.
“FIIs are likely to continue selling going forward, as long as the dollar continues to appreciate and US bonds deliver attractive yields. The dollar index around 109 and the 10-year bond yield above 4.5 percent are strong headwinds for FII flows,” said VK Vijayakumar, chief investment strategist, Geojit Financial Services.
In the previous calendar year (2024), FPI activities remained muted, with inflows of Rs 427 crore on a net basis in the domestic equity market, a sharp decline of 99.75 percent from a robust inflow of Rs 1.71 lakh crore in 2023. This shift in FPIs’ strategy was due to concerns over the valuation of Indian stocks, expected domestic GDP growth below the second quarter of fiscal 2025 (5.4 percent), weak corporate earnings and higher US bond yields.
In the first three days of 2025 (January 1-3), while foreign portfolio investors sold equities worth Rs 4,309.93 crore in the secondary market, they bought Rs 25.02 crore in the ‘primary market and others’ category, NSDL data showed. . Purchases in the primary market include special share purchases, rights issues, initial public offerings and share buybacks.
“The general perception that the market has become weak due to the ongoing FII selling in the last three months is very true. However, what is not common is that even if it is sold in the money market through exchanges, FIIs become buyers in the primary market. They were big investors through the QIP (qualified institutionalisation) route,” he said.
The trend of selling in the secondary market, or money market, and buying in the primary market by FPIs was also witnessed in 2024. In the money market, total FPIs sold Rs 1.21 lakh crore while investing Rs 1.22 lakh crore on a net basis through the primary market channel by 2024, according to NSDL data.
In December 2024, FPIs sold equity worth Rs 2,589.63 crore through exchanges and bought equity worth Rs 18,036.13 crore through the primary market and other categories.
“The message is clear: FII sales are due to high valuations in the secondary market. In core markets where prices are reasonable, FIIs have been persistent investors,” added Vijayakumar.
FPIs will closely watch companies’ third-quarter results, which begin this week, to decide on their action plan, analysts said.
| Total investment in equity (Rs crore) (-outflows/ +inflows) | |||
| Stock exchange | Primary market and more | Subtotal | |
| Jan-01 | -5351.85 | 0.8 | -5351.05 |
| Jan-02 | -613.46 | 16 | -597.46 |
| Jan-03 | 1655.38 | 8.22 | 1663.6 |
| Total | -4309.93 | 25.02 | -4285 |
| Source: NSDL | |||
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