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FPIs offloaded over $3 billion of Indian shares in three consecutive sessions. The move follows a renewed rally in Chinese stocks and potential SEBI curbs on derivatives trading.
Foreign Portfolio Investors (FPIs) have recently offloaded more than $3 billion worth of Indian shares over the course of three consecutive trading sessions. The sell-off comes amidst increasing participation in the Chinese stock market rally and growing concerns over new regulatory curbs on derivatives trading in India.
FPIs sold $1.82 billion worth of Indian equities on Thursday, according to provisional data. This followed the offloading of $621.4 million on October 1 and $767 million on the last trading day of September. These three sessions together mark a significant withdrawal of foreign capital from Indian markets, raising concerns about short-term volatility.
The recent rally in Chinese stocks, spurred by a stimulus package, has shifted investor focus from India to mainland China. The CSI 300 Index surged by 27% over nine trading days, drawing attention from foreign investors seeking to capitalise on China’s outperformance. Additionally, the Indian market faced headwinds after reports emerged that the Securities and Exchange Board of India (SEBI) may introduce new restrictions on derivatives trading, prompting further withdrawals from FPIs.
As FPIs reduce exposure to Indian equities, market valuations have become a point of concern. India’s Nifty50 index trades at a price-to-earnings (PE) ratio of 21.6 times its one-year forward earnings, significantly above its five-year average of 19.1x. In comparison, the Chinese CSI 300 Index trades at a PE ratio of 13.4x, even after its recent rally, offering potentially more attractive investment opportunities for foreign investors.
The recent FPI sell-off, driven by China's stock market rally and potential regulatory changes in India, has impacted Indian market sentiment and valuations. As FPIs shift their focus, Indian equities may face continued pressure in the near term. Traders will closely watch how this trend develops, particularly in relation to FPI share price movements.
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