Due to the significant strain this migration has placed on the Indian stock market, benchmark indices have dropped 8% from their highest points.
October's stock markets lacked the glitz of the holidays. Approximately $11.2 billion, or an unprecedented Rs 94,000 crore, was sold by foreign portfolio investors (FPIs). This was the biggest monthly outflow ever. The high valuation of Indian markets, the desire of foreign investors to diversify, and the opportunities in other markets, such as China, are some of the main causes of this. At the start of the Covid-19 pandemic in March 2020, FPI outflows reached a record of Rs 61,973 crore.
The current withdrawals follow a notable nine-month high of Rs 57,724 crore in FPI purchases in September 2024, which had increased investor confidence. However, FPIs were mostly net buyers throughout 2024 beginning in June, even though there had been a small period of outflows in April and May (totaling Rs 34,252 million). However, the selling frenzy in October, during which FPIs sold almost every day, reversed much of the profits from the previous year, bringing net foreign investments in stocks down to barely Rs 6,593 crore.
Due to the significant strain this migration has placed on the Indian stock market, benchmark indices have dropped 8% from their highest points. The premium valuation of Indian stocks, which are currently viewed as overpriced in comparison to the more favorable pricing of Chinese equities, is the main reason given by analysts for this. Capital outflows from India have intensified as a result of China's recent economic stimulus measures, which have also been instrumental in attracting overseas investors.
FPIs invested Rs 100 crore through the Voluntary Retention Route (VRR) in the debt market while withdrawing Rs 4,406 crore from the general loan category. Thus far this year, foreign investment in the debt market has totaled Rs 1.06 lakh crore.
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