Foreign investors have pulled out nearly $7 billion in the last two months, and over $12 billion since April this year

• Foreign institutional investors have pulled out nearly $7 billion from the Indian markets this year.
• FIIs have been net buyers in only one month this financial year – September.
• Nearly $13 billion worth of shares have been sold by FIIs so far, as opposed to inflows worth over $13 billion in the period last year.

Foreign institutional investors (FIIs) have offloaded nearly $7 billion worth of shares in the last two months and since the beginning of the financial year, FIIs have sold nearly $13 billion worth of shares.

During the financial year, only September has witnessed net buying from FIIs, that too only to the extent of $62 million. This comes at a time when the Nifty 50 index has gained nearly 20% since April.

“Part of the reason FIIs are selling is because valuations are not cheap and the inflation risk is real in India while the Reserve Bank of India, which historically was one of the more vigilant central banks, right now seems to be more on the dovish side," said Arvind Sanger, managing partner, Geosphere Capital Management to Economic Times.

Month (2021)	Amount ($ billion)
April	-1.70
May	-0.81
June	-0.003
July	-3.10
August	-0.34
September	0.06
October	-3.42
November	-3.39
Total	-12.70

Source: NSE, as on November 26, 2021

During the financial year, the last two months have recorded nearly $7 billion worth of selling and November is on track to be the month with the highest selling.


Some of the reasons for the pull out by FIIs include concerns around COVID-19, the inflation risk and US Federal Reserve’s plans to reduce the stimulus.

If we look at some of the companies that have high FII holdings, there has been a substantial withdrawal in the financial year, even without looking at the last two months. The following data does not factor in the heavy selling that has taken place in October and November.

Company	FII holding as on March 31, 2021	FII holding as on September 31, 2021	Decline
Shriram Transport Finance Corporations	61%	53.70%	-7.30%
ZEE Entertainment Enterprises Ltd	64.20%	57.20%	-7.00%
Fortis Healthcare	34.40%	29.30%	-5.10%
Manappuram Finance	38.60%	34.90%	-3.70%
Apollo Hospitals	54.50%	51.50%	-3.00%
Redington India	42%	39%	-3.00%

Note: Data till September 2021

Morgan Stanley last month downgraded Indian equities to equal-weight from overweight citing expensive valuations.

"We move tactically equal weight on India equities after strong relative gains - we expect a structural multi-year earnings recovery, but at 24 times forward price to earnings, we look for some consolidation ahead of Fed tapering, an RBI (rate) hike in February and higher energy costs," the investment banking company said.

Similarly, Goldman Sachs downgraded the Indian market from overweight, stating that the recovery has already been priced in.

“While we expect strong cyclical and profit recovery next year and remain medium-term constructive amid increasing digitalisation in the index, we think the recovery is well priced at current peak valuations. We, thus, take profits on our India overweight and lower it to market weight within our regional allocations,” it said.

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