According to data from exchanges, FPIs sold equity worth Rs 41,872 Crore through exchanges, after selling Rs 1,13 858 crore in equity in October.
The trend of FPIs purchasing through primary markets continued in November, with Rs 15,339 billion worth of purchases.
Exchange data shows that the total FPI sales through exchanges from October 1 to November 23 amounted to Rs 1,55,730 Crore.
Analysts said that this is the type of selling which occurs in an annual period when FPIs have a selling mode.
On November 22, the Sensex jumped 1,961 points or 2.54 per cent to 79117.11 and FPIs only pulled out Rs 1,278 crore.
Domestic institutional investors (DIIs), however, have invested Rs 37 559 crore so far in November and Rs 107 254 crore this October.
The FY25 earnings are in play: 'Sell India and buy China'
Three factors mainly led to the massive selling of FPIs. First, the "Sell India and Buy China" trade. Two concerns about FY25 earnings. Three, the Trump trade. Of the three, K Vijayakumar said, Chief Investment Strategist, Geojit Financial Services.
Trump's trade is also on its last legs, as valuations in the US have reached high levels.
The FPI sales in India are likely to slow down soon. The valuations of Indian large cap companies have also fallen from their elevated levels. FPIs are buying IT stocks, which has given IT stocks a greater degree of resilience. "Banking stocks have been resilient, despite FPI sales. This is mainly because DII bought," he said.
A JM Financial report indicates that the Republican Party and Donald Trump have taken control of all three branches of US government.
We believe Trump's plans to lower corporate taxes, increase import tariffs and deport illegal immigrants will lead to growth in the US, higher prices and higher interest rates. The report suggested that this could tempt FPIs into taking at least a portion of their funds to the US.
"FPIs continue to evaluate every country. We would be wrong to assume that they would always invest in India. FPIs may consider other markets if they become more attractive in terms of valuation. There are also very few FPIs that invest in one country. They are always reallocating their funds. FPIs are like domestic investors, who switch between companies and stocks.
"Considering where India is now, I don’t think this is a concern that we should be having." He said that Japan has mandated a few investments and is showing more interest than ever in India.
In addition to giving greater operational flexibility to Foreign Portfolio Investors (FPIs), the Reserve Bank of India and the Securities and Exchange Board of India have recently allowed FPIs the ability to classify equity shares in excess of 10% in Indian companies under the heading of Foreign Direct Investment (FDI), which will allow for a smoother and more efficient flow of foreign investment.
The RBI instructed FPIs that they must obtain the necessary approvals and consent from the invested companies if their equity holdings exceed the prescribed limits. They also reclassify these holdings as FDI.
According to the Foreign Exchange Management Non-Debt Instruments Rules for 2019, the investment made by a FPI must be less than 10% of the total paid up equity capital, on a fully-diluted basis.
The RBI notification stated that any FPI who invests in excess of the prescribed limits will have the option to divest their holdings, or reclassify them as FDI, within five business days of the settlement date of the trades that caused the breach.
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