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

The 4% drop in the Nifty 50 and Sensex this week left everyone in a tight huddle. According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the recent downturn was mostly caused by FIIs selling equity during the last five days.

On Tuesday, the benchmark Sensex fell more than 1,000 points, wiping out thousands of crores from investors' accounts. "In addition, some news and rumors contributed to market selling. SEBI has announced that the ultimate beneficiary standards for FPIs would be tightened from February 1st. This could have caused some FPI selling," Vijayakumar stated. According to the most recent statistics from the National Securities Depository Limited (NSDL), foreign portfolio investors sold Indian stocks worth Rs 16,601 crore in January.

What is the most likely SBI trigger that has FPIs worried?

The regulator is urging FPIs to disclose more information in order to prevent corporations from abusing the laws governing minimum public shareholding and offshore entities from indirectly owning Indian enterprises through shell companies.

FPIs will be required to disclose information on all holders of ownership, economic, and control rights. The rules, however, only apply to FPIs that have invested more than Rs 25,000 crore in the Indian stock market or have 50 percent of their equity assets under management invested in a single Indian corporate group.  Sebi has offered offshore funds an additional seven months to liquidate holdings if they fail to provide details about their investors by January 29, according to a report citing sources.