Election Result: FPIs Sell ₹12,436.22 Crore in Market Fallout

In a surprising turn of events, the outcome of the 2024 Lok Sabha Election has left investors uneasy, particularly Foreign Portfolio Investors (FPI) in the Indian Equity markets. The ruling Bhartiya Janta Party is expected to secure fewer seats than anticipated, causing uncertainty in the investment landscape.

On Tuesday, FPIs were noted as net sellers, offloading equities worth ₹12,436.22 crore, according to provisional data from the NSE. This significant sell-off triggered a more than 5% decline in both the Nifty-50 index and Sensex.

Uncertainties

Analysts predict continued uncertainty for FPI investments in the near term. In April 2024, FPIs turned net sellers, selling equities worth ₹8,671 crore. This trend intensified in May, with FPIs offloading equities worth ₹25,586 crore.

Factors contributing to this uncertainty include delays in expected interest rate cuts by the US Federal Reserve. The prolonged anticipation, coupled with a stronger dollar and higher treasury yields, has made investments in emerging markets less appealing to FPIs.

Vaibhav Vidwani, a Research Analyst at Bonanza Portfolio, attributed Tuesday’s market plunge to uncertainty surrounding the election outcome, possibly prompting foreign investors to divest.

Future Focus

Rakesh Parekh, MD and Co-Head of Portfolio Management Services at JM Financial Services Ltd, noted that regardless of election outcomes, growth and investment would remain key focuses for any government. Consequently, long-term investment attractiveness in India is expected to persist, leading to positive flows in the future.

Aditya Sood, Fund Manager at InCred Asset Management, highlighted that global emerging market allocations depend on factors like geopolitical stability and leadership continuity. With the election results finalized, investor attention is likely to shift towards government formation, ministerial appointments, fiscal policies, and the upcoming budget.