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Heavy selling by foreign portfolio investors (FPIs) last week sent a chill down the spine of retail investors, even as the clear trend of the former offloading shares in secondary market and investing big time in primary issues became noticeable.
As per NSDL data, FPIs sold shares worth ₹25,918 crore through stock exchanges this month up to November 26. During the same period, they invested ₹27,317 crore in the primary market despite loss-making new age businesses tapping the capital market with unprecedented valuations.
FPIs’ total investment in capital market this year up to November 26 was at ₹52,123 crore.
IPOs: Rich harvest mostly
Among the recent issues, FPIs invested ₹1,570 crore in FSN E-Commerce (Nykaa), ₹1,400 crore in PB Fintech (Policy Bazaar) and ₹7,500 crore in One 97 Communications (Paytm).
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said the big selling in secondary market was due to concerns over stretched valuations.
The sustained selling also reflects the downgrade of India rating from overweight to neutral by many foreign brokerages.
Vijayakumar said the enthusiastic FPI investment in the primary market partly arises from the attractive listing gains from most IPOs. However, the sudden spike in Covid cases globally has stoked concerns on economic recovery and spooked the bull run in domestic markets. The bellwether Sensex on Friday plunged 1,687 points to 57,107.
The pricing conundrum
Marquee investors such as BlackRock, CPPIB (Canadian Pension Plan Investment Board), Abu Dhabi Investment Authority and some prestigious universities lost heavily when the Paytm stock tanked about 40 per cent from the issue price in two days after listing, sending out a clear message that pricing the new-age tech IPOs is an extremely complex task, said Vijayakumar.
Nevertheless, most of the other IPOs this year had delivered good returns. Of the 74 initial public offers that had hit the market, 55 had listed at a huge premium.
Though rising inflation and reviving Covid cases remain a major concern, the Indian economy and corporates are in a much better shape with deleveraged balance sheet and gearing to kick off another capex cycle on the back of low interest rates, said an analyst.
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