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New Delhi: Overseas investors have pulled a record Rs 81,000 crore from Indian equities so far in October. This is the highest monthly outflow ever from the domestic market. As a result, both the Indian bourses are trading in negative for a couple of days. But what caused this massive sell-off? Why are foreign investors shifting their money from India? Another question that may arise is if FIIs are pulling their money in significant amounts, then why is Nifty just 4 per cent down from its record high? Here we got you covered.
Foreign Sell-Off Data: September vs October
Before moving forward, take an overview of foreign sell-off data. As per the provisional data from NSDL, the foreign sell-off surges in the ongoing month i.e. October. Between January and September, foreign portfolio investors (FPIs) bought Indian shares worth Rs 500 crore per day on average. However, in October, the trend reversed, with FPIs offloading stocks worth Rs 6,100 crore per day.
Data from the National Securities Depository Limited (NSDL) shows that foreign investors sold shares worth Rs 82,845 crore ($9.9 billion) until last Friday. On Monday, they sold another Rs 2,262 crore ($270 million), pushing the total October outflow to $10.17 billion.
This outflow surpasses the previous record set in March 2020, during the peak of the Covid-19 pandemic. That time, FPIs withdrew $7.9 billion, triggering a 23 per cent fall in the Sensex and Nifty indices.
What About Domestic Investors?
The impact of the sell-off has been cushioned by strong buying from domestic institutional investors (DIIs). In the month, domestic investors have purchased shares worth Rs 77,000 crore this month. So far in 2024, DIIs have invested Rs 4.1 trillion in the market. Despite the heavy selling by foreign investors, Indian markets have been relatively stable. The Nifty 50 index has fallen by only 4 per cent in October, while the Sensex is down 3.7 per cent.
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Why Are Foreign Investors Selling?
Foreign fund managers are shifting their focus to Chinese stocks after Beijing announced a stimulus package in late September. This stimulus fueled a 28 per cent surge in the Shanghai Composite Index over two weeks, attracting global investors back to China. As a result, many pulled their investments out of Indian stocks.
Is There Valuation Pressure In Indian Market?
While foreign investors have been net buyers in six out of ten months in 2024, concerns about high valuations have persisted throughout the year. Until now, strong corporate earnings supported market optimism. However, weaker-than-expected September quarter results have raised doubts about whether Indian stocks can justify their lofty prices.
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