FII Outflows Hit ₹58,711 Cr in October – Second Highest in 4.5 Years Amid China Rally, Middle East Tensions

Foreign institutional investors (FIIs) have sold the second-highest amount of shares in four-and-a-half years this month, largely due to a strong rally in Chinese stocks, rising tensions in the Middle East, and higher valuations of Indian equities. According to data from NSDL, FIIs sold shares worth ₹58,711 crore by 11 October, the biggest outflow since March 2020, when they sold a record ₹61,973 crore during the start of the pandemic.

Hyundai Motor IPO in Focus as FIIs Activity is Closely Watched

Market watchers are closely following FII activity as the month progresses, especially with Hyundai Motor India’s upcoming ₹27,870 crore IPO, the largest public issue in India’s history. This IPO, opening on 15 October, will be a key event, and institutional investors’ participation will be closely monitored.

Global Tensions and Crude Prices Influence FII Behaviour

“The heavy FII selling so far this month coincides with a hopeful sentiment in China and uncertainty in the Middle East, which also affects crude oil prices,” said R Venkataraman, Chairman of IIFL Securities. “It will be interesting to see how they approach the markets in the coming days, particularly with the Hyundai IPO opening this week.”

China Stimulus Drives FII Outflows from India

Since China introduced monetary and fiscal stimulus measures on 24 September, its Shanghai Composite Index has jumped 18.4%, reaching 3,217.74 by 11 October. Meanwhile, the Indian Nifty index has dropped by 3.8% over the same period, affected by FII selling. Though domestic institutional investors (DIIs) tried to offset these outflows by purchasing ₹57,792 crore worth of shares, foreign investors’ liquidation of bullish derivative positions pushed the Nifty lower.

India’s Valuations

“The stimulus from China and cheaper stock valuations there are the main reasons for FIIs pulling money out of India this month,” said Andrew Holland, CEO of Avendus Capital Public Markets. “But unless China follows through with more actions, the flows might slow down.”

Holland believes that while India’s long-term economic potential will attract global investments in the future, concerns about an escalating conflict between Israel and Iran, along with India’s high stock valuations, could hinder FII inflows in the short term.

FIIs Continue to Sell in Indian Secondary Markets

In India’s secondary or cash markets, FIIs have been net sellers for most of the last five fiscal years. NSE data shows that they sold shares worth ₹2.83 trillion in FY22, ₹2.28 trillion in FY23, ₹15,468 crore in FY24, and ₹98,127 crore so far in FY25.

However, FIIs have continued to invest in the primary market, such as IPOs, rights issues, and preferential allotments. They invested ₹2.74 trillion in FY21 and have continued this trend with ₹2.08 trillion in FY24 and ₹31,993 crore so far in FY25.