FPIs sink ₹94,017 crore into Indian equities; Outflows hit record high in October due to high market valuations

Foreign Portfolio Investor (FPI) The selloff in Chinese stock markets reached record highs in October amid ongoing geopolitical tensions and cheap valuations, continuing their strong selloff in the Indian market. The FPI outflows recorded in October were the highest ever in a single month in Indian markets. Specifically, it comes before US presidential election resultsFPIs became net sellers in October after a sharp U-turn on global cues.

This follows the aggressive buying spree recorded in September, when FPI inflows were the highest ever (YTD). Interest rates hit nine-month high after 50 basis points (bps) cut By the US Federal Reserve.

According to National Securities Depository Limited (NSDL) data, FPIs sold Indian equities were valued at Rs 94,017 crore and net outflows Taking into account debt, hybrid, debt-VRR and equity, it stood at Rs 96,358 crore as of October 31. FPI outflows hit a 10-month high in October, the biggest selloff in the Indian market YTD. Total credit investment declined in October 100 crores.

Also read: FPI sold Rs 85,790 crore in Indian equities: Selling hits 10-month high as China shares shift; What next?

Notably, domestic and global factors led FPIs to make a notable comeback in Indian markets in September, breaking the previous softness. They remained consistent buyers in June and July after election-related jitters subsided and stability returned to Indian markets. However, with the start of the new financial year 2024-25 (FY25), FPIs had stopped their buying spree.

FPI selling reached record high in October: Know why

“FPI sales data The sale of Rs 1,13,858 crore through exchanges in October is the highest ever sale by FPIs in a month. This sustained selling heavily contributed to the nearly eight per cent decline from the peak in the benchmark indices, said Dr VK Vijayakumar, chief investment strategist, Geojit Financial Services.

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“However, FPIs were buyers with investments in the primary market 19,842 crore in October. It is important to understand that primary market issues are mostly at fair valuations, while benchmark indices are trading at elevated valuations. This explains the duplicity in FPI behaviour,” said Dr VK Vijayakumar.

Another important trend in the sectoral moves is that despite massive FPI selling in the financial sector, the sector is resilient as valuations are reasonable, and the selling is absorbed by DIIs and individual investors, especially HNIs. Global markets will react to the US presidential elections for a few days, after which fundamental factors like US GDP growth, inflation and Fed rate cuts will influence market movements.

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FPI flow approach

The Sensex has fallen from its all-time high of 85,978 points to 79,389 points. Recent sessions have been bearish for the indices, led by fund outflows and India Inc’s lower than expected second quarter earnings. On Thursday, 30-share BSE Sensex closed at 79,389.06 points.With a fall of 553.12 points or 0.69 per cent, the Nifty closed at 24,205.35 with a fall of 135.50 points or 0.56 per cent. Barring the latest slowdown, FPIs had fueled the stock market rally.

According to D-Street experts, the momentum in Chinese stocks appears to be waning, as evidenced by the recent decline in the Shanghai and Hang Seng indices. Given the high valuations in India, FPIs may continue selling in the near term, capping any potential upside in the stock market.

Experts remain concerned that indian stock market Overheat will occur and the rating will increase. Analysts said Indian markets have shown their resilience positively based on strong economic performance on strong fundamentals and expected economic growth.

Also read: October Surprise: Inflow of retail investors has not made FIIs irrelevant

Interestingly, at a time when foreign investors were net sellers in Indian equities, domestic investors remained net buyers, leading to massive exit of foreign investors. They deposited stocks worth thousands of crores of rupees more from FPIs in October. This is likely to provide relief to the stock indices from the heavy fall. The recent gains in the index over the past three months were driven by strong GDP growth, controlled inflation, strong domestic liquidity and favorable monsoon conditions.

Disclaimer: The views and recommendations given in this analysis are those of the individual analysts or broking companies and not of Mint. We strongly advise investors to consult certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.