Are FPIs Back? Data Suggests Otherwise

But data suggests otherwise. Monday's trade saw FPI gross purchases of over Rs 85,000 crore. A single-day purchase of this quantum not seen in many months should have sent the benchmark over the roof, but the indices were up just 1.3% at the end of trade.

While this is on the positive side, keen watchers will look at the gross sell number. That stood little over Rs 75,000 crore. Thereby, giving us a near Rs 10,000-crore net buyers for Monday.

This data clearly shows FPI outflows continues to be strong despite the break in the 38 days of net selling.

So what could be the reason?

MSCI rebalancing announcements came in weeks in advance, but global fund managers waited till the late minute to rebalance their portfolio. Ideally, the rebalancing is done over weeks to ensure there is little price volatility, but 'Trump Trade' and continuous net selling by FPIs ensured this was pushed to the last date, that is, Nov. 25.

An interesting figure is that sale of shares in that quantity were largely between FPIs and there was very incremental participation from domestic institutions, especially mutual funds.

In the past, the street has seen domestic mutual funds supplying liquidity to foreign investors, but mutual funds have been net buyers during the correction phase, buying at every dip and deploying cash held by them.

The net buying is also precipitated by the quantum of shares bought in HDFC Bank Ltd. The stock saw a delivery volume of 81% and delivery turnover of over Rs 31,100 crore on Monday, as a result of increase in its foreign inclusion factor. FIF is the headroom available for foreign investors to invest in the stock. A bulk of the gross purchases by FPIs was in HDFC Bank and largely between foreign investors. And this sends a false signal to those who are considering FPI outflows have reversed. Wait for a few days before conclusive determination whether FPIs are back in the market. For now it is 'Trump Put' at play and the new tariff action expected by the President-elect.

By the way, he has already announced what he plans to do with China, Mexico and Canada.

Sajeet Manghat is Executive Editor at NDTV Profit.