FPIs withdrew Rs 22,420 cr from equities in Nov

Foreign investors have pulled out Rs 22,420 crore from the Indian equity market so far this month, owing to high domestic stock valuations, increasing allocations to China, and the rising US dollar as well as Treasury yields.

With this sell-off, Foreign Portfolio Investors (FPIs) have recorded a total outflow of Rs 15,827 crore in 2024 so far.

As liquidity tightens, FPI inflows are expected to remain subdued in the short term.

A positive shift in FPI activity is unlikely before early January, keeping overall market sentiment weak, Akhil Puri, Partner, Financial Advisory, Forvis Mazars in India, said.

According to the data, FPIs recorded a net outflow of Rs 22,420 crore so far this month.

This came following a net withdrawal of Rs 94,017 crore in October, which was the worst monthly outflow.

Before this, FPIs withdrew Rs 61,973 crore from equities in March 2020.

In September 2024, foreign investors made a nine-month high investment of Rs 57,724 crore.

The relentless FPI selling since October has been triggered by the cumulative impact of three factors: one, the high valuations in India; two, concerns regarding the earnings downgrade; and three, the Trump trade, V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

"While there is a larger belief that part of selling in November and large part of the year-round selling has been due to the 'Buy China, Sell India trade for FPIs', our sense is that it's been a 'Buy US, Sell India + other EMs' trade due to the Presidential election event in the US," Piyush Metha, smallcase manager and CIO at Caprize Investments, said.

This is evident from the US market returns versus Indian markets since September -- Indian markets fell 10 per cent while US markets moved up 10-12 per cent during the same period.

Even Chinese markets have corrected 10 per cent from their recent top made in end-September.

Himanshu Srivastava, associate director, Manager Research, Morningstar Investment Research India, said foreign investors are shifting their focus from Indian to Chinese stock markets due to China's new stimulus package and lower valuations.

Additionally, India's high market valuation, weak corporate results, and rising inflation, which might delay rate cuts, are raising concerns about economic slowdown.

Also, geopolitical tensions are adding to the uncertainty, prompting foreign investors to withdraw money from here, he said.

Further, the rising US dollar and Treasury yields are attracting investors to the US, expecting stronger economic prospects there, he added.

On the other hand, FPIs invested Rs 42 crore in the debt general limit and Rs 362 crore in the debt voluntary retention route (VRR) during the period under review.

So far  this year, FPIs invested Rs 1.06 lakh crore in the debt market.