Despite the festivities, October lacked the sparkle in equity markets. Foreign portfolio investors (FPIs) sold an unprecedented Rs 94,000 crore (approximately $11.2 billion) . This marked the largest-ever monthly outflow. Some of the key reasons for this include high valuation of Indian markets, foreign investors keen to diversify and prospects in other markets like China. Prior to this, the previous record for FPI outflows was Rs 61,973 crore in March 2020, at the onset of the Covid-19.
The recent outflows come on the heels of a significant Rs 57,724 crore FPI buying in September 2024, a nine-month high that had bolstered investor confidence. However, starting in June, despite a brief period of withdrawals in April and May (totalling Rs 34,252 crore), FPIs had been largely net buyers throughout 2024. Yet, October’s selling spree, where FPIs were net sellers nearly every day, erased much of the year’s gains, reducing net foreign investments in equities to just Rs 6,593 crore.
MonthEquityJanuary-25744February1539March35098April-8671May-25586June26565July32365August7320September57724October-94017This data has been sourced through NSDL’s latest FPI Net Investment Report. The amount under Equities is in INR Crore.
This exodus has exerted considerable pressure on the Indian stock market, leading to an 8% decline in benchmark indices from their peaks. Analysts attribute this to several factors, primarily the premium valuation of Indian stocks, which are now being seen as overvalued compared to the relatively attractive pricing of Chinese equities. China’s recent economic stimulus measures have also played a crucial role in drawing foreign investors, further intensifying capital outflows from India.
In the debt market, FPIs withdrew Rs 4,406 crore from the general debt category but invested Rs 100 crore through the Voluntary Retention Route (VRR). Overall, foreign investment in the debt market has amounted to Rs 1.06 lakh crore so far this year.
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