Foreign portfolio investors (FPIs) have reversed course in the Indian stock market, turning into net sellers in October after months of being net buyers. The data shows that they offloaded stocks worth a record Rs 94,017 crore in October, the highest amount in a single month. This is a stark contrast to the previous four months, where FPIs had bought stocks worth significant amounts, fueling a bull run in the market.
The Sensex has taken a hit, dropping from its all-time high to now trading at 79,389 points. The recent sessions have seen a bearish trend in the market, attributed to fund outflows and lower-than-expected Q2 earnings of Indian companies. Despite this, domestic institutional investors have continued to be net buyers, offsetting the selling pressure from foreign investors and preventing a sharp decline in the stock indices.
Vinod Nair, Head of Research at Geojit Financial Services, believes that the consolidation in the market is likely to continue in the short term. The trend reversal will depend on a slowdown in FIIs selling intensity and the outcome of the US presidential election. While FPIs have been selling, domestic institutional investors have been accumulating stocks in thousands of crores, providing support to the stock market.
The recent gains in the stock indices were driven by factors such as robust GDP growth, controlled inflation, strong domestic liquidity, and favorable monsoon conditions. The FPI activity in June and July was influenced by the smooth formation of the new government after the elections. Despite the current challenges in the market, the positive economic indicators have been supporting the stock market and could potentially lead to a reversal in the current trend.
Overall, the recent shift in FPI behavior in the Indian stock market has raised concerns among investors. The continuous selling by foreign investors, coupled with lower-than-expected earnings and global uncertainties, has resulted in a bearish trend in the market. However, the support from domestic institutional investors and positive economic indicators could help in stabilizing the market in the coming months. With the outcome of the US presidential election and FPI selling intensity being key factors to watch, investors are advised to stay cautious and monitor the market closely for any potential opportunities.
