FPIs sold $84.5 billion in secondary market equities since Sep-24

FPIs sold $84.5 billion in secondary market equities since Sep-24

FPI SELLING SINCE SEP-24 – THE BIG PICTUREFPIs have been net sellers in the last 2 years. You can see that in Assets under Custody (AUC) Data. The equity AUC of FPIs has fallen from $930 billion in Sep-24 to around $690 billion in Sep-26. That is a massive shrinkage of -25.8% in FPI AUC over 2 years. While the fall in large caps is one factor, FPIs have been heavy sellers in secondary markets.

In the last 2 years since September 2024, FPIs have been overall net sellers of $(47.32) billion in India. The break-up is more interesting. While the FPIs were net sellers of $(84.53) billion in secondary market equities, they were net buyers of $22.29 billion in IPOs and also net buyers of $14.93 billion in debt. In effect, FPIs have diversified assets.

MonthFPI-SMFPI-IPOFPI-EquityFPI-DebtFPI-TotalOct-24-13,556.912,361.48-11,195.43-277.31-11,472.74Nov-24-4,661.582,098.36-2,563.2222.43-2,540.79Dec-24-296.292,124.661,828.371,241.583,069.95Jan-25-9,491.57448.70-9,042.8780.29-8,962.58Feb-25-4,802.34824.99-3,977.351,180.36-2,796.99Mar-25-637.33236.11-401.224,246.153,844.93Apr-25395.09115.00510.09-2,844.72-2,334.63May-252,134.26209.682,343.941,292.523,636.46Jun-25976.42713.891,690.31-2,594.36-904.05Jul-25-3,707.941,655.51-2,052.431,418.38-634.05Aug-25-4,458.59464.71-3,993.881,655.47-2,338.41Sep-25-3,072.59371.04-2,701.551,289.94-1,411.61Oct-25448.081,208.131,656.212,374.444,030.65Nov-25-1,765.731,341.11-424.62744.64320.02Dec-25-3,370.80855.36-2,515.44-1,771.98-4,287.42Jan-26-4,279.80304.00-3,975.80741.05-3,234.75Feb-262,184.27312.432,496.701,670.004,166.70Mar-26-13,200.00476.20-12,723.80-876.66-13,600.46Apr-26-6,721.90247.56-6,474.34-1,084.86-7,559.20May-26-3,780.86330.47-3,450.39366.95-3,083.44Jun-26-5,646.01488.53-5,157.485,688.84531.36Jul-26712.181,410.982,123.162,070.504,193.66Aug-261,819.771,284.713,104.48-433.132,671.35Sep-26-4,761.371,011.10-3,750.27-2,358.89-6,109.16Oct-26-4,989.411,390.66-3,598.751,089.19-2,509.56Total-84,530.9522,285.37-62,245.5814,930.82-47,314.76Data Source: NSDL (SM – Secondary Markets) – All figures are in $ MillionWHAT TRIGGERED HEAVY FPI EQUITY SELLING IN LAST 2 YEARS?

Valuations were a major concern. With a Buffett Ratio in the range of 125% to 135%, there were major concerns that the markets were becoming overpriced.

Geopolitical risk has been another key factor. From US penal tariffs to the Iran war and Russian sanctions; India has had a major stand-off with geopolitical risks.

Rupee weakness also triggered selling in Indian equities. After all, when the rupee weakens, it sharply impacts the dollar-denominated returns of the FPIs.

There was a sharp Buy-AI trade among FPIs over the last 12-15 months. With limited AI plays in India, FPI flows gravitated to South Korea, Taiwan, and Mainland China.WHAT WE READ FROM THE FPI FLOW DATA OF THE LAST 2 YEARS?

While FPIs have been aggressive sellers in equities in the last 2 years, the break-up has been a lot more nuanced.

Let us look at the 6 months of FY25 first. This period saw secondary market equity selling of $(33.45) billion. This was partially offset by equity IPO buying of $8.09 billion, coupled with debt market buying of $6.49 billion. For the 6 months of FY25, FPIs were still net sellers overall to the tune of (18.86) billion.

Let us now turn to the 12 months of FY26. This period saw secondary market equity selling of $(27.72) billion. This was partially offset by equity IPO buying of $8.03 billion, coupled with debt market buying of $3.10 billion. For the 12 months of FY26, FPIs were still net sellers overall to the tune of (16.59) billion.

Let us finally look at the 7 months of FY27. This period saw secondary market equity selling of $(23.37) billion. This was partially offset by equity IPO buying of $6.16 billion, coupled with debt market buying of $5.34 billion. For the 7 months of FY27, FPIs were still net sellers overall to the tune of (11.87) billion.

We have already seen the triggers for FPI selling in secondary market equities. What were the triggers for IPO buying and debt market buying? In the case of IPOs, they offer special quotas to FPIs either via pre-IPO placements, anchor allocation or normal IPO allotment under the QIB quota. FPIs have preferred IPOs as it has given them access to high value companies like NSE, Jio Platforms, Manipal Hospitals etc.

What explains the buying in debt? There were several triggers. Firstly, the inclusion of Indian bonds into the global bond indices had resulted in substantial passive buying in Indian debt paper by FPIs. Also, the special tax incentives provided on interest and capital gains on government bonds for FPIs boosted demand. However, demand has tapered in recent months due to the risk of rising 10-year benchmark bond yields.

To sum up, FPI selling is a reality, but there is also a quiet reallocation that is happening. In the equity space, FPIs are underplaying large caps and staying neutral on mid-caps and small caps. With the rupee closer to ₹95/$, and yield spreads with the US benchmark at 250 bps, FPI interest in Indian bonds may just about return.

What could be road ahead in terms of FPI action in India. FPI interest in IPOs will depend on the quality of IPOs hitting the market. Debt could see some buying with the rupee and spreads factoring in most of the risks. Secondary market equity buying may still take some time, as concerted DFI buying has kept the Buffett Ratio elevated at above 122%.

Note: Buffett Ratio / Buffett Indicator is the Ratio of Market Cap to Annual GDP