FPIs continue selling spree for 27 consecutive sessions, outflows hit Rs 1.21 lakh crore

According to the latest data from Trendlyne, FPIs withdrew Rs 2,569 crore from Indian stocks in the latest session, bringing the total outflow over this period to Rs 1.21 lakh crore.

In October, FPIs were net sellers throughout the month, offloading Rs 1.14 lakh crore worth of Indian stocks.

This trend has persisted into November, with an additional Rs 7,111 crore withdrawn so far.

Furthermore, FPIs also turned net sellers in India's domestic debt market in October, marking a Rs 4,697 crore outflow, which is the first such instance since Indian government bonds were included in JP Morgan’s bond indices.

October was the second month in 2024 that FPIs were net sellers, with the previous occurrence in April when they offloaded bonds worth Rs 11,218 crore.

Despite their continued selling in the secondary markets, FPIs were active in the primary markets, investing Rs 20,000 crore in October.

This shift reflects analysts' views that the primary market offers more attractive valuations compared to the higher valuations in the secondary market.

The last time FPIs were net buyers was on September 26, when they purchased Rs 630 crore worth of shares.

From June to September, FPIs were strong buyers, adding Rs 26,565 crore in June, Rs 32,365 crore in July, Rs 7,320 crore in August, and Rs 57,724 crore in September.

This inflow helped drive the Indian markets up by 14.55 percent during these four months.

However, October’s significant outflows took a toll on market performance, with the Nifty 50 and Sensex both falling by 6 percent in the month and currently standing 8 percent below their recent highs.

The substantial outflows have also put pressure on the Indian rupee, which reached a new low of 84.1225 against the US dollar in the latest trading session.

The shift in FPI sentiment is being driven by a combination of global and domestic factors.

After years of strong growth, rising corporate profits, and China’s economic struggles, India had been a favoured destination for foreign investment.

However, high equity valuations, slowing economic and earnings growth, and a rebound in Chinese stocks due to recent stimulus measures are diminishing India’s appeal.

Additionally, there are signs of a slowdown in urban demand in India, with reports indicating that rising living costs and food inflation are squeezing the purchasing power of the middle class.

Goldman Sachs has recently downgraded its outlook for Indian equities from overweight to neutral, citing concerns over slowing economic growth and elevated valuations.

Economists are forecasting India’s economy to expand below 7 percent this fiscal year, a slowdown from over 8 percent growth last year.

Looking ahead, FPI sentiment towards Indian markets will depend on several factors, including the US Federal Reserve’s rate decision on Thursday (Nov. 7), the outcome of the US presidential election, and potential stimulus measures in China.