FPIs halt selling: Sign of favourable Lok Sabha poll result calming investors?

Foreign portfolio investors (FPIs) have been aggressively selling Indian stocks in May, reaching a total of ₹22,046 crore by the end of the month. This consistent selling is partly due to factors like a strong US dollar, persistent inflation, especially in the food sector and concerns about election outcomes.

However, there has been a slowdown in selling in recent sessions as investors anticipate a strong performance in the stock market indices. Both the Nifty and Sensex reached all-time highs this week, attracting significant investments.

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Data from the National Securities Depository Limited (NSDL) showed that a week ago, the cumulative total of selling was approximately ₹28,000 crore.

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How will Lok Sabha elections impact FPI?

VK Vijayakumar, chief investment strategist at Geojit Financial Services, noted, “The FII selling, which began as a trickle in April, turned into a flood in May. Going forward, as clarity emerges on the election front, FIIs are likely to buy in India since they cannot afford to miss the post-election results rally. In fact, the rally may begin even before the election results.”

ALSO READ- How did the Indian stock market react to elections in the past?

Amidst the ongoing general election in India and the accompanying uncertainty, foreign investors are cautious about entering the Indian equity markets before the election results are announced, according to Himanshu Srivastava, associate director – manager research at Morningstar Investment Research India.

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How has FPIs trend been this year?

April: FPIs were once again net sellers in Indian stocks, possibly influenced by the ongoing geopolitical tensions in the Middle East. Despite being net buyers until mid-April, FPIs sold stocks worth ₹8,671 crore by the end of the month.

February and March: FPIs shifted back to being net buyers.

January: FPIs significantly sold Indian stocks, becoming net sellers in the equity market.

(Inputs from PTI, ANI)

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