FIIs Dump ₹31,000 Crore in Indian Stocks in 3 Days! Is ‘Buy China, Sell India’ the New Strategy?

Foreign investors have sold Indian stocks worth around Rs 31,000 crore in just the first three days of October, driven by a shift in strategy favoring Chinese markets. This trend, known as the ‘Buy China, Sell India’ trade, has been fueled by the recent strong performance of Chinese stocks.

In the past month, the Hang Seng index surged by 26%, and experts believe Chinese stocks will continue to do well due to low valuations and economic recovery, boosted by monetary and fiscal stimulus from the Chinese government. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted these factors as the main reason for the foreign investors’ sudden change in strategy.

Rising geopolitical tensions between Israel and Iran are also affecting global markets. While crude oil prices have gone up, they haven’t spiked significantly yet. However, the situation could worsen if Israel targets oil installations in Iran.

India’s macroeconomic data has also shown some signs of slowing. Manufacturing PMI dropped from 57.5 in August to 56.5 in September, and services PMI fell from 60.9 to 57.7 in the same period. Additionally, central government spending fell 1.2% year-on-year in the first five months of FY25, and GST collection growth slowed to 6.5% in August 2024.

Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that foreign investor flows will likely stay volatile. If Chinese stocks keep rising, foreign investors may continue selling in India, where stock valuations remain high.

However, some analysts see this as an opportunity for long-term domestic investors to buy Indian banking stocks, which have become more attractively priced due to the recent selloff. While geopolitical tensions add uncertainty, global markets, including the US, have remained relatively stable. The continuation of foreign investor selling will depend on how long the momentum in Chinese markets lasts.