FPIs Pull Rs 58,711 Cr from Indian Equities in October Amid Geopolitical Tensions & Strong Chinese Market Performance

Foreign Portfolio Investors (FPIs) sold Rs 58,711 crore worth of Indian shares in October due to rising tensions between Israel and Iran, increasing oil prices, and strong performance in the Chinese stock market. This followed September’s high investment of Rs 57,724 crore.

FPIs Shift Strategy After Months of Buying

Since June, FPIs had been buying Indian equities, reversing a trend of withdrawals in April and May, when they pulled out Rs 34,252 crore. Despite this, FPIs have mostly been net buyers in 2024, except in January, April, and May, according to data from depositories.

Himanshu Srivastava, Associate Director at Morningstar Investment Research India, explained that geopolitical tensions and interest rate changes will impact foreign investments in Indian markets. In October, FPIs took a cautious approach, with net withdrawals of Rs 58,711 crore from equities.

Middle East Conflict and Higher Oil Prices

The conflict between Israel and Iran has increased uncertainty in global markets, pushing investors to reduce risks. Additionally, Brent crude oil prices have risen sharply from $69 per barrel on September 10 to $79 per barrel on October 10, adding to inflation concerns and fiscal burdens for India.

FPIs Follow ‘Sell India, Buy China’ Strategy

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out that FPIs are selling Indian shares while buying Chinese stocks, as China’s government announced measures to boost its economy. This shift has contributed to the outflow of FPI funds from Indian markets.

Pankaj Singh, from Smartwealth.ai, anticipates that the FPI outflow could stabilize closer to the U.S. elections. The current withdrawal trend is seen as temporary.

FPI Activity in Debt Markets

In the debt markets, FPIs withdrew Rs 1,635 crore through the General Limit but invested Rs 952 crore via the Voluntary Retention Route (VRR) during the same period.

Despite the recent outflows, FPIs have invested Rs 41,899 crore in Indian equities and Rs 1.09 lakh crore in the debt market so far this year.