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  1. FPIs sell-off over ₹17,000 crore in May: Why FPIs are selling in May, here's what you need to know

FPIs sell-off over ₹17,000 crore in May: Why FPIs are selling in May, here's what you need to know

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Upstox

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3 min read • Updated: May 13, 2024, 4:43 PM

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Summary

The uncertainty about the ongoing election in India is a big reason, but it’s not the only one driving the sell-off. The Indian market’s underperformance and the increase in bond yields are also contributing to FPIs deciding to sell.

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FPIs sell-off over ₹17,000 crore in May

The month of May holds a special place in the world of stock market, unlike any other month. The adage “Sell in May and Go Away” - this approach suggests that traders should think about selling their stocks in May and go for vacation. Indeed, those who heeded this counsel would likely be quite pleased. As the NSE benchmark NIFTY50 index falters, having descended 2.27% thus far in May, it marks one of the steepest declines witnessed since the tumultuous October of 2023. Let us decode what could be the reason for this sharp downturn.

The reason for the sharpest fall can be attributed to many reasons starting from the pre-election jitters on back-drop of “low voter turnout” in the three phases of the ongoing Lok Sabha elections. But one key which comes to the fore is aggressive selling by overseas investors.

Indian markets witnessed aggressive selling by Foreign Portfolio Investors (FPIs) in May, with a staggering amount of over ₹17,000 crore as per data by National Securities Depository Limited (NSDL).

FPI Investments in month of May 2024 so far
DateGross Purchases ₹ in CrGross Sales ₹ in CrNet investment ₹ in Cr
02-05-202421,768.1019,917.081,851.02
03-05-202417,121.4817,816.48-695
06-05-202417,677.6619,815.71-2,138.05
07-05-202413,576.9714,727.95-1,150.98
08-05-202414,222.3017,165.28-2,942.98
09-05-202413,068.2218,405.02-5,336.80
10-05-202411,524.7118,194.63-6,669.92
1,08,959.441,26,042.15-17,082.71

According to data provided by NSDL, FPIs on a gross basis, purchased ₹1,08,959 crore worth of equities and sold ₹1,26,042 crore till May 10. In April, overseas investors dumped ₹8,681 crore of domestic shares.

Uncertainty surrounding the ongoing elections in India is one of the prominent factors, but it isn’t the sole factor driving the sell-off from FPIs. There is a double whammy of underperformance by the Indian market and rising bond yields. The contrast in performance of Asian markets has led to a strategic shift in FPI investment, favouring selling in India. This is perceived as relatively expensive, and buying comparatively cheaper Asian peers like Hong Kong and China.

Indian markets relatively expensive than other emerging markets

The NSE benchmark index NIFTY 50 is trading at 21.2x TTM PE, which is more than double that of Hong Kong. As per the data from Hang Seng Indexes (HIS) the month-end April 2024 average P/E ratio stood at 10.2x. Additionally, US Treasury yields were seen surging on Friday as market participants digested downbeat consumer sentiment data. The yield on the 10-year Treasury was seen at 4.5%. But things might change once there’s more clarity about the general election results.