FPIs turn net sellers in Dalal Street. What is scaring them off? This could be a reason

Foreign portfolio investors have turned net sellers in the Indian stock market so far in January 2024, after making a beeline to accumulate domestic stocks during the past two months – November and December.

The 4 percent dip in Nifty 50 and Sensex this week had everyone in a tense huddle. “The trigger for the (latest) correction came mainly from the sustained selling by FIIs who have sold equity…during the last 5 days,” said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. 

On Tuesday, benchmark Sensex declined over 1,000 points, wiping off lakhs of crores from investors’ kitty. “Some news and rumours also contributed to the selling in the market. There is news that SEBI is tightening the ultimate beneficiary norms for FPIs starting February 1st. This might have triggered some FPI selling,” Vijayakumar said.

The latest data available from the National Securities Depository Limited (NSDL) showed that the FPIs sold Indian stocks worth Rs 16,601 crore in January.

What is the likely SBI trigger that has FPIs worried?
The regulator is pushing for more disclosures from FPIs to prevent companies from manipulating the rules on minimum public shareholding, and prevent overseas entities from indirectly controlling Indian companies via shell firms.

FPIs will have to give out details of all holders of ownership, economic, and control rights. The demands, however, are applicable only to FPIs whose 50 percent of equity assets under management are invested in a single Indian corporate group, or FPIs that have invested over Rs 25,000 crore in the Indian stock market.  Sebi has offered a relief of additional seven months to offshore funds to liquidate holdings, if case they fail to disclose data about their investors by January 29, a report quoting sources suggested.