FPI Outflows Set To Continue, High US Yields And IPO Returns Shape Investment Flows

New Delhi: Foreign portfolio investor (FPI) outflows from Indian equities are likely to continue as elevated US bond yields and better returns from India's IPO market influence investment decisions, according to analysts.

Foreign investors have been selling shares through stock exchanges while continuing to invest through the primary market, reflecting a preference for new offerings despite caution towards listed equities.

Contrasting Investment Flows

Equity outflows through exchanges stood at Rs 25,682 crore through August 25, according to the figures cited in the report.

Primary-market investment reached Rs 8,551 crore up to September 25, said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd.

For the year, FPI selling through exchanges totalled Rs 2,95,971 crore, while investment through the primary market amounted to Rs 54,398 crore.

Analysts said high US bond yields and opportunities in IPOs could sustain this pattern of secondary-market selling alongside primary-market purchases.

Smaller Stocks Attract Buyers

Another notable trend is the divergence within foreign investors' stock preferences. Despite selling large-cap shares, FPIs have remained sustained buyers in midcap and smallcap stocks, analysts said.

They added that foreign investors were also following market momentum, suggesting that their investment choices remained selective across segments.

Benchmarks Extend Weekly Losses

Indian equity benchmarks ended lower for the seventh consecutive week amid weak domestic and global cues.

The Sensex fell 0.54 per cent over the week to 73,895.74, while the Nifty declined 0.88 per cent to 23,140.50.

Midcap and smallcap indices also weakened. Technology and financial stocks were among the main laggards, while realty emerged as the strongest-performing sector.

External Risks Shape Outlook

Crude oil prices and geopolitical developments remained key influences on sentiment, analysts said.

Improving domestic growth indicators offered support, but weakening market breadth highlighted the weight of external pressures.

Volatility is expected to remain elevated until greater clarity emerges on oil prices and geopolitical developments. Analysts favoured a measured approach towards fresh positions despite the improving growth outlook.