Foreign Portfolio Investors (FPIs) extended their selling streak for the second consecutive month in November, but the pace of selling slowed compared to October. According to NSDL data, FPIs withdrew ₹39,315 crore from Indian stocks via exchanges in November.

This was significantly lower than the record ₹94,017 crore sold in October, which marked the largest monthly outflow on record. Interestingly, FPIs turned net buyers between November 23 and November 25, infusing ₹11,112 crore during this period.

However, this buying momentum was short-lived as they quickly resumed their selling spree, offloading ₹11,756 crore the following day and another ₹4,383 crore during Friday’s session.

While FPIs remained net sellers in November, they continued to invest in the primary market, driven by more reasonable valuations compared to the rich valuations in the secondary market, as per experts. FPIs invested ₹17,704 crore in the primary market during November, resulting in a net outflow of ₹21,611 crore for the month.

For the full calendar year, FPIs invested ₹1,03,601 crore in the primary market, surpassing the ₹43,347.1 crore invested in 2023. However, they pulled out ₹1,18,620 crore through the stock exchanges, resulting in net outflows of ₹15,019 crore so far.

Concerns over expensive valuations, softer Q2 earnings, and a slowdown in the Indian economy may have impacted overseas sentiment. Additionally, large stimulus measures announced by China may have shifted FPI focus, as these measures are expected to help revive an economy that has struggled to gain momentum since the COVID-19 pandemic.

Furthermore, the policies of President-elect Donald Trump, the strength of the US dollar, and rising bond yields may have also dented investor sentiment. In June, July, August, and September, they bought stocks worth ₹26,565 crore, ₹32,365 crore, ₹7,320 crore, and ₹57,724 crore, respectively.

“The reason for this dichotomy is the high valuations in the secondary market and the reasonable valuations in the primary market. It appears that FIIs are likely to turn out consistent buyers only when the market corrects further and valuations become attractive,” said Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

It is important to note that in CY23, FPIs invested ₹1,71,106.9 crore, bringing the total inflow across debt, hybrid, debt-VRR, and equity markets to ₹2.37 lakh crore, according to NSDL data.

Key factors that could shape the FPI inflows

Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said, “Following weeks of relentless selling, FIIs staged a notable reversal at the beginning of the last week. This renewed enthusiasm can likely be attributed to the decisive victory of the BJP-led Mahayuti alliance in the Maharashtra Assembly elections.”

He said the resulting political stability appears to have strengthened investor confidence. Srivastava also pointed out that the rebalancing of MSCI’s key indices, which added a few select Indian stocks, likely played a role in this buying activity. Such adjustments necessitate realignment by passive funds to ensure their portfolios align with updated benchmarks.

Looking ahead, he noted that foreign investments into Indian equity markets will hinge on several key factors, including the policies of Donald Trump’s presidency, the inflation and interest rate environment, and the evolving geopolitical landscape.

He also highlighted that third-quarter earnings performance and the country’s progress in economic growth would be crucial in shaping investor sentiment and influencing foreign inflows.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.