FPIs withdraw over Rs 85,000 cr from Indian equities in Oct on attractive Chinese market valuations

New Delhi: Foreign investors have continued selling in the Indian market, pulling out a massive Rs 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.

October is turning into the worst-ever month in terms of foreign fund outflows. In March 2020, FPIs withdrew Rs 61,973 crore from equities.

The latest outflow came after a nine-month high investment of Rs 57,724 crore in September 2024.

Since June, foreign portfolio investors (FPIs) have consistently bought equities after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, except for January, April, and May, data with the depositories showed.

Looking ahead, the trajectory of global events like geopolitical developments and interest rate movements will play a crucial role in shaping future foreign investment in Indian equities, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

On the domestic front, key indicators like inflation trends, corporate earnings, and the impact of festive season demand will also be closely watched by FPIs as they assess opportunities in the Indian market, he added.

According to the data, FPIs made a net withdrawal of Rs 85,790 crore from equities between October 1 and 25.

The sustained FPI selling impacted market sentiments, pulling the NSE's benchmark index Nifty down by 8 per cent from the peak.

The trend of sustained FPI selling is showing no signs of reversal any time soon. The selling was triggered by the Chinese stimulus measures and the cheap valuations of Chinese stocks. Also, the elevated valuations made India the top choice of FPIs to sell, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

This month witnessed significant outflows in FPI as geopolitical tensions and shifting global economic conditions influenced investor sentiment, Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India, said.

Heightened concerns around geopolitical stability and recent developments in China have led foreign investors to adopt a more cautious stance, reallocating 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 US elections looming, a sharp recent rise in US bond yields implying diminished expectations for aggressive rate cuts by the US Fed, lower growth and high inflation expected back home, continued geopolitical issues between Israel-Iran and Russia-Ukraine has led to FPIs pulling out funds from most EMs, including India," Piyush Mehta, smallcase Manager and CIO at Caprize Investment, said.

In addition, FPIs pulled out Rs 5,008 crore from the debt general limit and invested Rs 410 crore from the debt Voluntary Retention Route (VRR) during the period under review.

So far this year, FPIs invested Rs 14,820 crore in equities and Rs 1.05 lakh crore in the debt market.