Foreign Portfolio Investors (FPIs) continued their selling spree for the fifth consecutive session on Monday, October 7, pulling out a total of $5.4 billion from Indian equities. This comes after a strong net buying of $5.9 billion in September, marking a sharp reversal in investor sentiment.
Prior to this, the last extended FPI sell-off occurred in May, when overseas investors sold Indian shares for 11 consecutive sessions through May 16. However, the total outflow in May was $3.6 billion, significantly lower than the current $5.4 billion withdrawal.
Year-to-Date FPI Flows Decline
With Monday’s sell-off, the net year-to-date Foreign Portfolio Investor (FPI) buying in Indian stocks has declined to $6.4 billion, a sharp drop from nearly $12 billion at the end of September. The recent outflows reflect a significant shift in investor sentiment, as Indian markets face mounting global uncertainties.
In contrast, South Korea has emerged as the top performer among emerging markets in 2024, attracting $10.5 billion in FPI inflows. Indonesia has also seen a positive trend, with inflows of $3.1 billion. On the other hand, Taiwan has witnessed the largest outflows among emerging markets, with $12.6 billion withdrawn so far this year.
Heavy Outflows Continue
Provisional data from stock exchanges show that FPIs offloaded nearly $1 billion worth of shares on Monday alone. Additionally, they withdrew over a billion dollars during each of the previous two trading sessions.
Despite these significant outflows, domestic institutional investors (DIIs) stepped in, purchasing an equivalent $5.5 billion worth of shares over the same five-session period.
Factors Behind the Sell-Off
Market participants point to several reasons for the FPI sell-off. The outperformance of Chinese stocks has shifted investor focus, while escalating geopolitical tensions and changes in derivatives trading rules have further dampened sentiment towards Indian equities.
Market Impact
The selling pressure weighed heavily on Indian markets, with the benchmark Nifty 50 index closing in the red for the sixth straight session on Monday. The Nifty 50 dropped nearly 1%, ending the day at 24,795.75 points, bringing its cumulative six-day loss to 5.4%.
India remains the most expensive emerging market, trading at 21 times its one-year forward earnings, compared to South Korea’s 8.6 times. This valuation premium, along with global uncertainties, may continue to impact FPI sentiment in the near term.
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