FII/FPI Dump Indian Holdings in Massive Amount in April

Foreign Investors have sold rapidly in the Indian Domestic Market equities during April. The Foreign Portfolio Investors remained bearish on Indian Markets and have sold shares worth Rs.6,300 crores till now in April amid various concerns like the rise in US Bond Yields and tweaks in India’s Tax treaty with Mauritius.

Foreign Investors Sell Indian Holdings in April Month

Foreign Portfolio Investors have continued their sellings in April 2024. This is coming at a time when the 7th Largest Country in the world is going through seven-phased general elections that have commenced on April 19th. FPI has a net selling worth of Rs.6,300  Crores for April and their ownership under Indian stocks currently stands at a decade low of 16.1%.FPI has also sold in the debt market with outflows of Rs.10,640. Foreign Portfolio Investors(FPIs)  have a net sell position of around Rs.20,500 Crores in the Cash market for April 2024.

Reasons for This Continuous Selling From Foreign Investors

The several reasons for this massive dump in Indian Holdings include concerns over the rise in US treasury Bond Yields, The 10 Year US Bond Yield currently stands at 4.7% which is a hugely attractive level for foreign investors triggered by higher US retail inflation data which have dashed the hopes for an early rate cut by the US Fed, earlier analysts were expecting rate cuts to begin from May.

Another major trigger for this FPI selling has been the tweak in India’s Tax Treaty with the Island nation Mauritius which will now impose higher scrutiny on investments made in India through Mauritius. The two nations had reached a consensus on a protocol amending a double taxation avoidance agreement (DTAA). The protocol has specified that tax relief cannot be utilised for the indirect benefits of residents from another country and most of the investors investing through Mauritius entities into Indian markets are from other countries.

One more reason, regarding this FPI selling can be the ongoing seven-phased elections in India as FPIs often pull off their stake during election time as they prefer stability, During the election time there is uncertainty regarding various future policies.

Conclusion: There is not a single reason for this selling by FPIs, The selling is driven by multiple reasons as mentioned above. The positive point to consider in this scenario is that the FPI  selling in the equity markets is getting absorbed by DIIs, HNIs and retail investors. This current selling by FPIs is a temporary phenomenon and Domestic Institutional Investors are also there to drive forward the Indian markets with more stability expected after positive outcomes from ongoing elections. The benchmark index Nifty50 is still up by 1.25% for April.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.