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Foreign institutional investors (FIIs) have aggressively sold off Indian equities due to the outperformance of the Hong Kong index, Hang Seng. According to provisional data from the National Stock Exchange (NSE), foreign investors have pulled out approximately $2.9 billion (Rs 24,000 crore) from the Indian markets so far in May. This represents the worst selloff among Asian markets and marks the largest FII outflow in India since January 2024.
Throughout May, Sensex and Nifty have posted returns of 0.9 percent and 1.25 percent, respectively. Meanwhile, other Asian markets like Hong Kong saw returns of 5.8 percent, Japan 1.2 percent, Korea 1.1 percent, Taiwan 1 percent, and Jakarta 0.3 percent. In contrast, the Shanghai market recorded a negative return of 2 percent.
Besides India, FIIs withdrew $700 million from Indonesia, $415 million from Vietnam, $210 million from Thailand, and $58 million from the Philippines. Conversely, FIIs invested $7.59 billion in Japan, $6.26 billion in Taiwan, $1.44 billion in South Korea, and more than $500 million in Malaysia.
Tanvi Kanchan, Head of UAE Business & Strategy at Anand Rathi Shares and Stock Brokers, explained that the selling stems from the Hong Kong index’s outperformance. FIIs are shifting funds from more expensive markets like India to more affordable markets like Hong Kong, where the price-to-earnings (PE) ratio is around 10 compared to India’s 20 PE.
She also noted that uncertainty surrounding the upcoming elections contributes to the selloff. “Foreign portfolio investors generally avoid uncertainty. They prefer to play it safe and lock in profits made last year. FII buying may increase after election results,” she added.
