The recent rally in Chinese stocks and new curbs on derivatives trading have prompted foreign portfolio investors (FPIs) to cut their exposure to the Indian market. Provisional data from stock exchanges show that FPIs sold $1.82 billion worth of shares on Thursday, marking their third consecutive session as net sellers.
Heavy Selling by FPIs in October
FPIs offloaded $621.4 million worth of Indian shares on October 1, following sales of $767 million on the last trading day of September. This continued sell-off has had a noticeable impact on India’s market flows.
India Loses Top Spot in Emerging Market Inflows
As a result of this selling pressure, India has lost its position as the leading recipient of foreign inflows among emerging markets.
South Korea has now attracted the highest foreign inflows in 2024, with a year-to-date tally of $10.3 billion. In comparison, India’s FPI inflows have declined to $8.6 billion, according to Bloomberg data.
FPI Concerns Over SEBI’s Derivatives Trading Curbs
In addition to the Chinese rally, reports suggest that FPIs are also concerned about the Securities and Exchange Board of India’s (SEBI) plans to impose new curbs on derivatives trading. This regulatory move has added to the uncertainty surrounding Indian markets, potentially influencing FPI selling.
Shift in Focus to Chinese Equities
Traders are increasingly turning to the Chinese market to take advantage of the ongoing rally in mainland stocks. China’s CSI 300 Index surged by 27% over nine trading sessions through September 30, following the announcement of a stimulus package. This sharp rebound in Chinese equities has drawn global investors, contributing to India’s weaker inflows.