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Below the Weekly Quote on FPI by Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth

FPI Flows in Indian Markets:

Same Playbook, Different Numbers

Foreign portfolio flows presented a much more interesting picture this week than the headline equity selling suggests. On the exchange tape, FPIs remained clear sellers in the secondary market, with provisional NSE data showing Rs 11,490 crore of net equity selling during 21–25 September. However, settled depository data tells a different story: NSDL/CDSL data shows a net Rs 3,843 crore inflow into equity for the week. The large divergence is explained almost entirely by continued FPI participation in the primary market, particularly the Rs 5,515 crore primary-market inflow recorded on 24 September.

Equity?: selling continues, but IPO appetite remains strong

The underlying secondary-market trend remains cautious. Based on settled data, FPIs sold roughly Rs 2,006 crore in secondary equities during the week, while primary-market investments were approximately Rs 5,848 crore. In other words, the foreign investor is not exiting Indian equities uniformly; rather, there is a clear preference for selective primary-market opportunities over broad-based secondary-market exposure.

Take NSE IPO for example, which closed with a 5.7x overall subscription, with the QIB portion subscribed 12.68x. FPIs submitted bids for 140.32 million shares, highlighting the continuing institutional appetite for good quality primary-market opportunities even as the same investors remain sellers in the secondary market.

As I highlighted in my previous week’s note, this distinction is important. The FPI behaviour currently looks less like a wholesale withdrawal from India and more like portfolio selectivity – reducing exposure to existing listed equities while allocating capital to specific IPOs/fresh listings where valuations, scarcity and liquidity may be more attractive. It’s the same playbook.

Debt?*: modest net inflows, but composition matters

Debt flows were relatively resilient. Settled FPI data indicates a net Rs 885 crore inflow into debt-related instruments during the week. However, the composition is revealing, nothing sensational though. FAR — the Fully Accessible Route for government securities — saw approximately Rs 2,912 crore of net buying, more than offsetting around Rs 822 crore of selling under the general debt route and roughly Rs 1,205 crore of selling under VRR.

This suggests that foreign demand has not disappeared from Indian fixed income, but is becoming increasingly sensitive to relative yield, currency risk and the global rate environment.

What is driving the caution? ?

No change here either. Same three forces remain central.

First, the US rate environment. US 10-year yield was relatively unchanged on Friday after recent selling pressure intensified following hawkish Federal Reserve commentary and stronger-than-expected economic data.

Second, oil and geopoliconomics remain the major risk. Elevated crude prices are particularly a challenge for India because of their immediate impact on the current account, inflation expectations and the rupee. Brent remaining above $100/bbl is not helping at all.

Third, currency risk is important for foreign investors. The rupee has been hovering around Rs 96/$. The RBI reportedly sold US dollars early in the session on Friday to prevent a breach past the key psychological 96-per-dollar mark. Even if Indian asset returns remain attractive in rupee terms, depreciation can materially reduce dollar returns.

* Outlook for next week *

The near-term FPI outlook is likely to remain data- and macro-sensitive rather than directionally one-way. A combination of easing crude, stabilisation in US yields and a firmer rupee could encourage some re-engagement in secondary equities. Conversely, another rise in US yields or crude could prolong selling.

*The key indicators to watch are therefore*:

• India IIP and manufacturing data — IIP for August is due on 28 September and final manufacturing PMI on 1 October.

• US ISM manufacturing and employment indicators, including the September ISM on 29 September and September payrolls on 2 October.

• US inflation/PCE data, which will influence expectations around the Fed's next move.

• US 10-year yield and Dollar Index — critical for EM allocation decisions.

• Brent crude and USD/INR, arguably the two most important India-specific transmission variables.

• IPO activity and fresh listings, where FPI participation continues to be substantially stronger than in the secondary market.

• India’s second half borrowing calendar is out. With the total gross market borrowing for FY 2026-27 estimated at Rs 15,99,506 crore, lower from the initial budget estimate of Rs 17,20,000 crore, could see some action in the debt segment.

*Bottom line*: the headline Rs 11,490 crore provisional equity outflow understates the complexity of this week's FPI behaviour. The settled data shows continued secondary-market selling, strong primary-market participation and selective debt buying — particularly through FAR. The next phase of flows will likely hinge on whether the combination of US yields, crude and the rupee stabilises enough to make Indian secondary-market attractive again for FPIs.

*The views are personal*.

Source: Trendlyne.com, CDSL India, The Financial Express, India Infoline, Trading Economics, The Economic Times, NDTV Profit, NSE India, Internal

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