Foreign Portfolio Investors (FPIs) have made October 2024 the month with the highest-ever sell-off in Indian equities, withdrawing Rs.77,701 crores. This surpassed previous outflows seen during the COVID-19 pandemic in March 2020. The sell-off was driven by global economic factors, including a stronger U.S. dollar and rising interest rates, which negatively affected emerging markets like India.
Ajay Bagga, a market expert, explained that “India’s FPI outflows were partly due to a strong U.S. dollar and rising bond yields. This created a ‘no-landing’ scenario where a resilient U.S. economy diverted funds away from Indian markets.” Furthermore, China’s economic stimulus also lured foreign investors toward Chinese markets, adding pressure on Indian equities.
Despite the heavy FPI outflows, domestic investors have stepped in to support the market. According to data from the National Stock Exchange (NSE), domestic institutional investors (DIIs) injected Rs.74,176.20 crores into the market during October, helping to stabilize indices like the Nifty 50 and Sensex, which only fell by around 5% from their 52-week highs.
Bagga further noted, “India is dealing with high valuations, an unfavorable macroeconomic environment, and underwhelming earnings across sectors, leading to continued foreign outflows.” However, the strong domestic participation suggests a growing reliance on local investors to cushion the stock market from external shocks.
As global uncertainty continues to shape investment strategies, market analysts believe that FPI activity may remain volatile, influenced by factors such as U.S. Federal Reserve policies and shifts in global growth projections.
