THE BRIEF BUSINESS. DISTILLED.

Do Foreign Portfolio Investors Matter For Indian Stock Markets?

- V. KESHAVDEV

What happens when close to $25 billion gets pulled out of equities in a span of 12 months? The most probable outcome would be mass capitulation on the Street. That was not to be though. Foreign portfolio investors did pull out en masse over the past one year, but benchmark indices - the Sensex and Nifty - have falling 2,756 points (-4.46%) withstood the slaughter to 58,960 and 932 points (-5.06%) to 17,486, as of October 18.

"When was the last time you had seen the S&P 500 down 22% year-todate and the Indian indices staying unchanged?" (See: The divergence Is showing And How), asks Sunil Singhania, founder of Abakkus Asset Manager LLP.

Such a performance would be dubbed as "resilience of the India Growth Story." Indeed. Consider what happened in 2008. When ₹52,987 crore was taken out, the market had caved in 55%. Today, 14 years later, the velocity of the money is 3,81 times that of the 2008 outflow, yet the indices tell a different story. But whether the indices will be able to weather another bout of massive selling by foreign investors, who own over 25% of India’s market cap, remains a question. Total FPI holding value as on October 27 is `46.82 lakh crore) based on June 2022 shareholding in 1,582 stocks..

To begin with, 2008 was a different era altogether where the credit crisis was brewing in the financial sector, but this time round it’s a macro challenge blowing across developed economies, including the U.S., the world’s biggest economy.