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FPIs recorded the highest-ever monthly outflow, withdrawing ₹94,000 crore from Indian equities in October 2024. High valuations and attractive Chinese stocks contributed to this historic pullback.
Foreign Portfolio Investors (FPIs) withdrew a historic ₹94,000 crore (approximately $11.2 billion) from the Indian stock market in October 2024, marking the largest monthly outflow on record. High domestic equity valuations, coupled with attractive Chinese stock valuations, drove this considerable capital shift. This withdrawal surpasses previous records, including a notable ₹61,973 crore outflow during the global market instability in March 2020.
The massive outflow in October contrasts sharply with the nine-month high investment seen in September 2024, when FPIs injected ₹57,724 crore into Indian equities. October’s pullback brought the total net investment for 2024 down to ₹6,593 crore, significantly affecting market sentiment. Throughout October, FPIs were net sellers nearly every day, contributing to an approximate 8% decline in India’s benchmark indices from their recent peaks.
Several key factors influenced FPIs’ decision to pull back from Indian equities. Elevated domestic valuations, which made Indian stocks relatively expensive, was a major factor. Additionally, Chinese equities presented a more attractive valuation landscape for global investors, bolstered by the Chinese government’s economic stimulus measures aimed at promoting growth. This shift in appeal led FPIs to rebalance portfolios towards Chinese assets, offering better-perceived value.
Despite the large-scale FPI exit, domestic institutional investors (DIIs) and high-net-worth individuals (HNIs) have largely absorbed the sell-off. The financial sector, in particular, maintained resilience as DIIs and individual investors helped stabilise this segment, reflecting confidence in fair valuations within specific sectors of the Indian market.
Alongside equity movements, FPIs also made strategic adjustments in the Indian debt market. In October, they withdrew ₹4,406 crore from the general debt limit but invested ₹100 crore through the Voluntary Retention Route (VRR), demonstrating selective engagement in India’s debt assets. Overall, FPIs have invested ₹1.06 lakh crore in the Indian debt market in 2024, indicating continued interest in this asset class.
The record-breaking FPI outflow in October highlights the impact of global market dynamics and valuation differentials on foreign investments in India. As FPIs reassess their portfolios, upcoming global and domestic events will likely play a critical role in shaping future FPI flows and affecting FPI share price trends.
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This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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