FPIs Extend Selling Streak in Indian Equities

Foreign portfolio investors (FPIs) continued their selling streak in February, but the selling moderated compared to January, according to data from the National Securities Depository (NSDL). FPIs offloaded Indian equities worth Rs 5,294 crore in February, following a sale of Rs 28,852 crore worth of stocks in January.

The reallocation of funds to China and Taiwan, along with uncertainties from the sharp selloff in Adani Group shares, intensified FPI selling in January. Independent market expert Mehraboon Irani noted that foreign investors are trimming their investments from emerging markets like India to raise exposure to China due to attractive valuations.

Valuation Differences and Market Outlook

The Nifty 50's price to earnings (P/E) ratio stood at 26.31 as of March 6, compared to FTSE China A50's 13.95 and 11.30 for Hong Kong's Hang Seng index. A lower relative P/E ratio indicates attractive valuations, while a higher P/E implies expensive valuations. With domestic earnings likely to remain muted due to high interest rates, foreign investors may take a while to buy Indian equities as they expect valuations to fall further.

Sector-wise Selling and Buying Trends

FPIs sold nearly Rs 5,000 crore worth of shares in the oil and gas sector in February and turned net sellers in power and metals. However, capital goods, information technology, and services stocks saw renewed buying interest from FPIs. India's benchmark Nifty 50 fell 2% in February on sustained foreign selling, extending losses for a third month in a row.