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Foreign portfolio investors have withdrawn $10.1 billion from Indian equities over 15 trading sessions. Despite the selling pressure, domestic investors have supported the market, preventing steeper declines in key indices like the Nifty50.
Foreign portfolio investors (FPIs) have sold off a staggering $10.1 billion worth of Indian equities over the past 15 trading sessions. This massive withdrawal represents the highest monthly outflow from Indian markets since the pandemic-induced sell-off in March 2020. During that period, FPIs pulled out $8.4 billion. This selling spree has largely been attributed to rich valuations in Indian stocks and renewed investor interest in China following positive economic developments.
Despite this significant foreign selling pressure, the Indian markets have managed to avoid a major crash. The benchmark Nifty50 index has dropped 5.3% since the end of September, closing at 24,781.10 on Monday. Domestic institutional investors (DIIs), particularly mutual funds, have played a crucial role in stabilising the market. Local investors have injected around $10 billion into the market during this period, absorbing much of the FPI outflow.
The domestic buying spree has helped limit the extent of the market downturn, with DIIs taking advantage of the lower prices to bolster their positions. Retail investors have also contributed by buying the dips, providing further support to Indian equities. However, the future trajectory of the market remains uncertain as earnings reports for the September quarter continue to reflect lower-than-expected results.
One of the key factors contributing to the FPI outflows is a shift in international investor sentiment. A recent survey by BofA Securities revealed that fund managers are becoming more optimistic about China’s economic prospects, which has led to reduced allocations to Indian equities. This shift has further widened the allocation gap between India and other emerging markets.
As FPIs continue to withdraw from Indian equities, domestic investors remain a vital buffer against potential market shocks. While Indian stocks still trade at premium valuations, the market’s resilience will largely depend on local investors’ ability to maintain their buying momentum. The FPI share price remains a crucial indicator of broader market trends.
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This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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