FPI Sell-off in Indian Stocks Reaches ₹82,000 Crore in October — Is China the Only Reason?

Foreign portfolio investors (FPIs) have been selling Indian stocks heavily this October, marking the highest monthly outflow ever. FPIs have sold ₹82,479 crore worth of equities, surpassing the previous record set during the COVID-19 pandemic in March 2020.

This sell-off comes as FPIs shift their focus to Chinese stocks, where Beijing has introduced measures to support its economy. These actions include cutting key interest rates, which has renewed confidence in China’s recovery and potential for better corporate profits.

What’s Keeping Indian Markets Stable?

Despite this large sell-off, India’s markets have not been hit as hard as expected. While both the Nifty 50 and Sensex have fallen by about 4% in October, the drop is much smaller than the 23% plunge during March 2020. Domestic institutional investors (DIIs) have played a big role in this, absorbing much of the FPI selling. DIIs have invested ₹77,000 crore in October so far, helping to prevent a larger market decline.

Why Are FPIs Selling Indian Stocks?

Aside from the China factor, FPIs are selling Indian equities due to multiple reasons:

• Indian stocks are considered expensive, even after recent corrections.
• Geopolitical tensions, especially between Iran and Israel, have increased.
• Companies’ financial performance in the September quarter has not been encouraging, with weak growth and profits.

Indian Valuations Remain High

Indian stocks are still trading at high valuations, which may not align with their actual performance. Some large-cap stocks have managed to justify their high valuations because of their long-term growth potential, but overall, market sentiment is negative. A recovery is possible, but it may take time, according to experts like Dr. V K Vijayakumar from Geojit Financial Services.