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Foreign investors have continued to sell into the Indian market, pulling a huge ₹85,790 crore (about $10.2 billion) out of equities this month due to Chinese stimulus, attractive stock valuations and high domestic stock prices.
October will be the worst month ever for foreign fund outflows. In March 2020, FPIs raised ₹61,973 crore from equities.
The latest outflow came after a nine-month high investment of ₹57,724 crore in September 2024.
Since June, foreign portfolio investors (FPIs) have been consistently buying shares after withdrawing ₹34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, barring January, April and May, data from the depositories show.
Looking ahead, the trajectory of global events such as geopolitical developments and interest rate movements will play a crucial role in shaping future foreign investment in Indian equities, said Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India.
On the domestic front, key indicators such as inflation trends, corporate earnings and the impact of demand during the festive season will also be closely watched by FPIs as they assess the opportunities in the Indian market, he added.
According to the data, FPIs made a net withdrawal of ₹85,790 crore from equities between October 1 and 25.
The continued FPI selling affected market sentiment, causing the NSE’s benchmark index Nifty to fall 8% from its peak.
The trend of continued FPI selling shows no signs of reversing in the near term. The selling was driven by Chinese stimulus measures and cheap valuations of Chinese stocks. Moreover, high valuations made India the best choice for FPIs to sell, says VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
This month saw significant outflows at FPI as geopolitical tensions and changing global economic conditions impacted investor sentiment, said Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India.
Increased concerns about geopolitical stability and recent developments in China have prompted foreign investors to take a more cautious stance and reallocate capital to safer markets. This trend highlights the impact of global uncertainties on emerging markets, where volatility can significantly shape investment patterns, he added.
“With the US elections approaching, a sharp recent rise in US bond yields implying reduced expectations for aggressive rate cuts by the US Fed, and lower growth and high inflation expected at home, lingering geopolitical issues between Israel- Iran and Russia-Ukraine led to FPIs. Withdrawing money from most emerging markets including India,” said Piyush Mehta, small case manager and CIO at Caprize Investment.
Moreover, FPIs raised ₹5,008 crore from the general debt limit and invested ₹410 crore from the debt voluntary retention (VRR) route during the period under review.
So far this year, FPIs have invested ₹14,820 crore in equities and ₹1.05 lakh crore in the debt market.
Published – Oct 27, 2024 11:50 AM IST
