FPIs exit markets after mega economic package

Foreign portfolio investors (FPIs) have stepped up their selling in India’s equity market since Prime Minister Narendra Modi announced a ₹20-lakh crore economic package on May 12. Till Friday evening, nearly 40 per cent of FPI selling in the cash and derivative segments in May had come in just four trading days that week, data mined from provisional figures given by stock exchanges show.

A break-up of the figures reveals that FPIs sold ₹6,486 crore of cash stocks, ₹2,869 crore worth index futures and ₹737 crore in stock futures in four days.

At around noon on Tuesday, there were media news flashes on an address by the PM at 8 pm. Since then, FPIs have not been net buyers in the market for a single trading session, data show.

Nifty, Bank Nifty fall

Both the Nifty and Bank Nifty indices, two of the largest traded derivative products in India, had been reeling under FPI selling pressure since May 12. The indices fell by 5.6 per cent and 7.15 per cent, respectively, from their respective highs in four days last week.

On May 13, the Nifty touched a high of 9,584. By May 15, it had fallen 534 points to touch a low of 9,050. Similarly, Bank Nifty fell 1,440 points from a high of 20,122 to a low of 18,663 during the same time. The global markets were stable on these four days.

Buying support from domestic institutional investors (DIIs) was also thin during the four trading sessions; they bought stocks worth only ₹1,896 crore in the cash segment. DIIs, led by mutual funds and insurance companies, have heavy regulatory as well as self-imposed restrictions on derivative speculation and hence are virtually absent in the futures and options segment.

Massive selling spree

“Data speaks. FPIs went on a massive selling spree since May 12 and slammed the markets on the economic package announcement,” said Deepak Sawhney, an independent data analytics expert. “Apart from the last four days, if the FPI net figures appear net positive, it is a misnomer. Exchanges don’t adjust certain data where foreign companies are selling the shares and FPIs are buying them, which was the case this month as a huge block of Hindustan Unilever (HUL) shares hit the market on May 7.”

On May 7, HUL shares worth ₹26,300 crore were sold by foreign entities. The FPI buying in the market that day was worth ₹19,000 crore while DIIs were net purchasers of stocks worth ₹3,818 crore. Almost all FPI and DII buying was into HUL that day. If this ₹19,000 crore invested in HUL shares is excluded, then FPIs have been net sellers in the cash and futures segment, data analytics experts say.

Both sellers and large buyers of HUL were foreign entities but only those registered as FPIs have to report their numbers to the exchanges and SEBI. Similarly, net buying by DIIs in May so far is just ₹1,056 crore after adjusting for HUL.

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