Foreign Portfolio Investors (FPIs) pulled out over ₹20,000 crore from financial services and information technology (IT) sectors in April, as they continued their selling spree in Indian equities for the seventh straight month.

As per the latest data, the financial services sector saw a net outflow of ₹12,891 crore in the month while the IT sector witnessed an outflow of ₹8,579 crore. However, FPIs were net buyers in healthcare (₹5,231 crore), FMCG (₹1,756 crore) and automobile (₹1,160 crore) among others, thereby reducing the total outflow to ₹17,141 crore. 

The sell-off continues unabated in May, too, with foreign investors pulling out ₹11,035 crore as on Monday (in five trading days).

FPIs have been net sellers in the market since October 2021. Rising inflation, tightening monetary policy by major central banks, rising interest rates in the US and other developed markets and the ongoing Russia-Ukraine war and its impact on oil prices have spooked foreign investors, forcing them to exit India and other emerging markets.

A recent report from primeinfobase.com, an initiative of PRIME database group, said FPI holding in companies listed on the National Stock Exchange (NSE) declined to a nine-year low of 20.15 per cent as of March 2022 from 20.71 per cent in December 2021.

High valuations

“FPIs started selling when valuations reached unsustainably high levels. Even after the recent correction, Nifty is trading at around 19x FY23 earnings,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“FIIs are likely to turn buyers if the market corrects another 5 per cent from the current levels. It is important to appreciate the fact that with Russia becoming uninvestable and China reeling under severe lockdowns and growth slowdown, India will again become a good destination for FPIs,” he added.

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