Foreign portfolio investors withdraw ₹85,790 cr. from Indian equities in October

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Last Updated29/10/2024

Foreign investors have continued selling in the Indian market, pulling out a massive ₹85,790 crore (around $10.2 billion) from equities this month due to Chinese stimulus measures, attractive stock valuations, and the elevated pricing of domestic equities.

Foreign Portfolio Investors (FPIs) have been selling heavily in the Indian market, with outflows reaching ₹85,790 crore (around $10.2 billion) from equities in October, marking the worst monthly outflow on record. Several factors contribute to this exodus, including China's recent economic stimulus measures, more favorable stock valuations in other markets, and India’s relatively high equity prices.

Chinese Economic Stimulus and Attractive Valuations: China’s economic stimulus has drawn significant FPI interest due to its impact on market valuations, making China’s equities more appealing to investors who have been seeking relatively undervalued assets.
Domestic Valuation Concerns: The elevated pricing of Indian stocks has made it a top target for FPI withdrawals, as India’s premium valuations prompt investors to reallocate to other emerging markets.
Geopolitical and Global Economic Uncertainty: Recent global tensions—particularly in the Middle East and Europe, with conflicts involving Israel-Iran and Russia-Ukraine—are intensifying FPI caution across emerging markets, including India. Additionally, U.S. economic conditions, such as rising bond yields and limited prospects for rate cuts, further impact the appeal of Indian equities.

Domestic Economic Indicators: Going forward, FPIs will closely track inflation, corporate earnings, and festive season demand in India as they evaluate the market’s resilience and potential for growth.
Global Events: Developments in global interest rates, geopolitical stability, and economic policies, particularly in the U.S. and China, are also crucial. As the U.S. gears up for elections and bond yields remain high, FPIs may prioritize lower-risk markets over high-volatility investments.

The sustained selling by FPIs has led to a noticeable impact on Indian stock markets, with the NSE’s benchmark index, Nifty, seeing an 8% decline from its peak. The overall sentiment in Indian equities has been dampened by this persistent foreign selling pressure, with few signs of reversal in the short term.

Despite the substantial equity outflows, FPIs maintained some interest in India’s debt market, pulling out ₹5,008 crore from the debt general limit but investing ₹410 crore under the Voluntary Retention Route (VRR). So far in 2024, FPIs have invested ₹14,820 crore in Indian equities and ₹1.05 lakh crore in debt markets, reflecting the relative stability in debt versus the high volatility in equities.