FPI: Risk-off sentiment, US yields fuel selloff in FPI-heavy stocks

Mumbai: Shares of companies with higher foreign ownership have slumped of late as renewed outflows from overseas investors have put the spotlight on these stocks. With the deadline for foreign portfolio investors (FPIs) to comply with the beneficial ownership norms around the corner, analysts said sentiment in several such stocks is jittery.
HDFC Bank, with a 52% FPI holding, and IndusInd Bank, with 42%, dropped 15% each since last Wednesday. Zee Entertainment, with a 28% FPI holding, tumbled 36% during this period. Jindal Stainless and Indiabulls Housing, both with a 23% FPI stake each, dropped 13% each.

Stocks with high FPI holdings are susceptible to downside risks in the event of risk-off sentiment, said analysts. FPIs have sold Indian shares worth ₹27,400 crore in the last four trading sessions.

“In the current scenario, FPIs are adopting a risk-off strategy in emerging markets, anticipating an economic slowdown due to high-interest rates and the ripple effects of decelerating developed economies,” said Vinod Nair, head of research at Geojit Fin Services. “India is trading at premium and, as a result, making stocks vulnerable to a change in view. Consequently, significant negative events and below-expected results are triggering cascading selling pressure.”

FPIs have sold Indian shares worth Rs 27,400 crore in the last four trading sessions.

The combination of robust macro data in the US and comments from the Fed Governor suggesting that interest rate cuts may not happen in a hurry have resulted in Treasury yields firming up. Investors were expecting the US Federal Reserve to cut interest rates in its March meeting.