FPIs withdraw Rs 17,696 cr from Indian markets in Dec so far.

FII selling throws up a compelling opportunity for long-term investors… Selling due to Omicron, Inflation…. Shifts to other developing countries…

According to the depositories data, FPIs took out Rs 13,470 crore from equities, Rs 4,066 crore from the debt segment and Rs 160 crore from hybrid instruments between December 1-17.

Foreign portfolio investors (FPIs) have pulled out Rs 17,696 crore from the Indian markets in December so far amid uncertainty due to a new coronavirus strain, Omicron, and expectations of faster tapering by the US Federal Reserve. According to the depositories data, FPIs took out Rs 13,470 crore from equities, Rs 4,066 crore from the debt segment, and Rs 160 crore from hybrid instruments between December 1-17. In November, FPIs were net sellers to the tune of Rs 2,521 crore in Indian markets.

There continue to be uncertainties on the global as well as domestic fronts.
The concerns over the highly transmissible Omicron variant of corona virus persist and have impacted global growth outlook, he added.
“Also, the economic growth has also been relatively slow, and India’s earnings have not grown much,”
If the situation worsens, it could further prompt them to redeem investments from emerging markets like India which are considered to be more prone to turmoil in the global markets.
Since banking constitutes the largest FPI holding, it is bearing the brunt of FPI selling.
Sustained FPI selling has made the high quality banking stocks attractive from the valuation perspective, However fundamentally, the sector’s current positioning signals an optimistic long term outlook. In the quarter gone by, most of the bigger private banks either met or outperformed market expectations. Not only did banks witness improvement in asset quality owing to improved collections and contained restructurings, but they also managed to equip their balance sheet with adequate provisioning.

As markets globally continued to navigate currents surrounding inflation, monetary policies and Omicron, the beacon of pessimism was passed on to the domestic bourses as well. FIIs have been withdrawing funds every single day this month. Except for September’21, FIIs have been net sellers since April’21. A major casualty of this selling spree has been Bank Nifty with majority of the top 10 constituents of the index experiencing a sequential drop in FII holdings for the September quarter.

In fact, Bank Nifty has been a relative underperformer not only since the pandemic’s onset but even on YTD and 6 month period basis. History provides evidence that there is correlation between the sell-off by FIIs and Bank Nifty’s underperformance. Since 2017, if we look at those twelve months where FII outflows have been the highest, Bank Nifty has underperformed the benchmark index two-thirds of the time.
With respect to other emerging markets,analysts say, South Korea, the Philippines, Taiwan, Thailand and Indonesia, witnessed inflows of USD 1,870 million, USD 1,707 million, USD 297 million, USD 94 million and USD 57 million, respectively.
“FPI flows are expected to remain volatile given key events such as upcoming state elections and monetary tightening by developed countries,”

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