Foreign Portfolio Investors Resume Selling Indian Stocks

Foreign Portfolio Investors (FPIs), which now own significant amount of Indian stocks have once again begun selling. For the first few days in the Month of April, the trend was very encouraging with net inflows in the cash market. However, in the last few days the trend has reversed and they have begun selling.

Date	Net purchases/sales
April 17	-1,391.98
April 16	-2920.36
April 15	1359.31
April 13	-1243.71
April 9	1373.62
April 8	1,943.41
April 7	741.77
April 3	-1960.97
April1	-1167.97

Massive outflows in March

In March the outflows from Indian stocks was massive, with Foreign Portfolio Investors selling stocks to the tune of almost Rs 66,000 crores. This resulted in a sharp decline in the markets, though we have seen some recovery in the markets in April. In fact, the indices have now recovered almost 20 per cent from their recent lows of March.

It's always extremely difficult to predict which direction flows would move in. Most of the FPI investment has largely to do with global trends. Should global markets fall, Foreign Portfolio Investors tend to sell, which pushes Indian markets lower. Until a few years ago, markets were heavily reliant on FPI flows, however, over the last few years the increased participation of retail investors in mutual funds has ensured that mutual funds now remain the mainstay and hold the markets steady.

In fact, rising level of investments in SIPs has ensured that the mutual fund industry continues to keep the markets stable, at a time when FPIs sell.

Flows to remain volatile

Flows from Foreign Portfolio Investors will continue to remain volatile, as long as coronavirus infections continue to dominate. A trend reversal is highly possible should infections abate or new cure is find for the deadly virus. At the moment, the trend is not in one particular direction and flows could remain volatile over the foreseeable future.

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