FPI Selling Spree: Oil & Gas, Financials, Auto sectors lead outflows in November so far

Foreign Portfolio Investors (FPIs) continued their aggressive selling spree in Indian equities through November, following a record sell-off in October. Subdued corporate earnings, premium valuations compared to global peers, escalating geopolitical tensions, and rising US Treasury yields are among the key factors driving the sustained outflows.

As per data from the National Securities Depository Ltd (NSDL), FPIs offloaded Indian equities worth over ₹27,800 crore in November so far. This follows a significant FPI sell-off of ₹94,017 crore in October 2024.

In the first half of November, the sell-off was concentrated primarily in the financials, oil & gas, and Fast-Moving Consumer Goods (FMCG) sectors.

“Several factors have led to the selling activity by FIIs: weak earnings, high valuations compared to other markets, and global economic influences such as rising US bond yields. While some of the selling by FIIs in the secondary market is being counterbalanced by buying in the primary market, it is expected that FIIs will reduce their selling as we near the end of the calendar year,” said Vipul Bhowar, Senior Director Listed Investments, Waterfield Advisors.

He believes that fresh allocations or significant investments by FPIs are likely to resume once there is greater clarity regarding the policies of US President-elect Donald Trump’s administration.

Here’s a look at the sectors that FPIs sold and bought the most during the first fifteen days of November 2024:

Top Sectors with FPI Outflows

The Oil, Gas & Consumable Fuels sector recorded the highest FPI outflows, with ₹7,214 crore withdrawn in the first half of November 2024. This follows a significant sell-off of ₹21,444 crore in the sector during October.

The Financial Services sector experienced FPI outflows of ₹7,092 crore during the first fortnight of November, after witnessing substantial selling of ₹26,139 crore in October.

The Automobile and Auto Components sector ranked next, with FPIs pulling out ₹4,411 crore between November 1-15, adding to the ₹10,440 crore outflows recorded in the previous month.

“FPIs this calendar year have been reducing their weightage in mature sectors when growth would be closer to our nominal GDP and allocating capital to high-growth businesses. For example, in the financial sectors, FPIs have been increasing allocation in Capital Market themes like Asset management, exchanges, and healthcare,” Bhowar said.

Automobiles, Metals, and Construction can be impacted by FPI withdrawals. Rising costs and changing consumer preferences are driven by concerns over global commodity prices and economic slowdowns. The construction sector is particularly sensitive to shifts in government spending and infrastructure projects, he added.

Meanwhile, the FMCG sector also faced notable FPI outflows of ₹3,589 crore in the first half of November, compared to ₹11,582 crore in outflows for October.

Other sectors impacted by FPI selling during November 1-15 include Telecommunications, with outflows of ₹2,136 crore; Metals & Mining, at ₹1,291 crore; and Capital Goods, with withdrawals amounting to ₹1,004 crore.

What are FPIs buying?

During the first half of November, FPIs concentrated their buying activity in the Information Technology (IT) and Construction sectors.

The IT sector attracted FPI inflows amounting to ₹3,087 crore, while the Construction sector received ₹1,917 crore in investments. Additionally, FPIs purchased shares worth ₹734 crore in the Healthcare sector and ₹694 crore in the Realty sector during the same period.

FPIs flows are significantly influenced by factors such as India's economic fundamentals, regulatory developments, market performance, global economic conditions, and currency stability. Geopolitical uncertainties and evolving economic landscapes further contribute to the inherent volatility in FPI activity.

While upcoming Initial Public Offerings (IPOs) may temporarily boost investments in the primary market, sustained interest from FPIs will largely hinge on macroeconomic stability and the performance of corporate earnings, analysts said.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.