Geopolitical Tensions Spark FPI Exodus From Indian Stocks

Recently, foreign portfolio investors (FPIs) have shifted from being net buyers to net sellers in Indian stocks, likely influenced by the ongoing geopolitical tensions in the Middle East prompting investors to divest from their portfolios.

According to data from the National Securities Depository Limited (NSDL), FPIs have collectively offloaded stocks worth Rs 5,254 crore.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPIs have been particularly active in selling IT, FMCG, and consumer durables stocks this month, anticipating poor Q4 results. However, they have shown interest in buying autos, capital goods, telecom, financial services, and power sector stocks.

This recent shift in FPI behavior follows a trend where they aggressively sold Indian stocks in January 2024, only to become net buyers again in February and March. This oscillation contrasts with their accumulation of domestic stocks in November and December of the previous year, where they injected funds worth Rs 66,135 crore and Rs 9,001 crore, respectively.

Despite the recent sell-off, the Indian economy continues to exhibit robust growth, with GDP expanding by a significant 8.4% during the October-December quarter of FY 2023-24, positioning India as the fastest-growing major economy. This positive outlook has been bolstered by firm GDP growth forecasts, manageable inflation levels, political stability at the central government level, and indications that the central bank has concluded its monetary tightening measures.

Overall, while FPI participation in Indian stocks has seen fluctuations, their significant inflows in recent months have contributed to the bullish trend in the Indian stock market, driving benchmark indices towards record highs.

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