Foreign Portfolio Investors (FPIs) sold shares worth ₹27,142 crore in just the first three trading sessions of October. This sudden outflow is due to rising geopolitical tensions, especially between Israel and Iran, a sharp increase in crude oil prices, and a rebound in Chinese markets.
Significant Shift After Strong September Investment
In September, FPIs had invested ₹57,724 crore in Indian markets, marking a nine-month high. However, the situation changed quickly in October. Since June, FPIs have been net buyers of Indian equities, but this pattern broke in the first few days of October.
Reasons for the Outflow
Several global factors have driven this trend. Himanshu Srivastava, Associate Director of Manager Research at Morningstar India, pointed out that the ongoing conflict in the Middle East, rising oil prices, and the strong performance of Chinese stocks have led to this sell-off.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained that Chinese stocks have surged by 26% in the past month. With low valuations and government support through monetary and fiscal measures, Chinese markets have become more attractive to foreign investors, causing them to shift funds away from Indian equities.
Impact on Indian Markets
The large outflow of funds from Indian markets has led to a sharp correction in stock prices. FPIs were particularly focused on selling shares in financial stocks, especially frontline banks, which have now become more attractively valued. Some experts believe this could be a good buying opportunity for long-term domestic investors.
FPI Activity in Debt Markets
In the debt markets, FPIs withdrew ₹900 crore through the General Limit, but invested ₹190 crore via the Voluntary Retention Route (VRR).
Overall FPI Investments in 2024
Despite the recent outflows, FPIs have invested ₹73,468 crore in Indian equities and ₹1.09 lakh crore in the debt market so far in 2024. The future direction of FPI investments will likely depend on global factors like interest rates and geopolitical developments.
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