New Delhi: Overseas investors have withdrawn a record Rs 81,000 crore from Indian equities so far in October. That is the biggest monthly outflow ever from the domestic market. As a result, both the Indian bourses are trading in the negative for two days in a row. But what caused this massive sell-off? Why is it that foreign investors are shifting their money from India? So, another question that might be coming to mind is: If FIIs are moving out big time, then why is Nifty down merely by 4% from its all-time high? Let's break this for you.
Foreign Sell-Off Data: September vs October
Take a view of foreign sell-off data before moving forward. Provisional data collated by NSDL indicates that the foreign sell-off surges in the ongoing month that is October. Between January and September, FPIs bought Indian shares worth Rs 500 crore per day on an average. But during October, the situation turns on its head with the sellers coming out in droves, offloading stocks worth Rs 6,100 crore per day.
Data from the National Securities Depository Limited shows that foreign investors sold shares worth Rs 82,845 crore or $9.9 billion until last Friday. On Monday, they sold another Rs 2,262 crore or $270 million, which made the total outflow in October $10.17 billion.
It flows out more than the previous amount taken out in March 2020, when the Covid-19 pandemic was at its peak. During that period, FPIs withdrew $7.9 billion, which saw a 23 per cent crash in the Sensex and Nifty indices.
How About Domestic Investors?
So far, the sell-off has been cushioned by strong buying from domestic institutional investors (DIIs). In the month, domestic investors have bought shares worth Rs 77,000 crore this month. So far in 2024, DIIs have injected Rs 4.1 trillion into the market. Despite the heavy selling by foreign investors, Indian markets have remained relatively stable. The Nifty 50 index has fallen by just 4 per cent in October while the Sensex is down 3.7 per cent.
Why are foreign investors selling?
Foreign fund managers took their attention to Chinese stocks when Beijing announced a stimulus package at the end of September. This stimulus saw the Shanghai Composite Index soar by 28 per cent in two weeks, sending investors around the globe back to China. Therefore, most withdrew investments from Indian stocks.
Is There Valuation Pressure In Indian Market?
While foreign investors have been net buyers in six out of ten months this year, the challenges posed by high valuations are there all along. Until now, robust corporate earnings have driven market euphoria. But it's time results for the September quarter are going to be softer than expected; that is beginning to question whether Indian stocks are worth this price taG.
