New Delhi

Foreign investors pulled out a massive Rs 94,000 crore (around $11.2 billion) from the Indian stock market in October, making it the worst-ever month in terms of outflows triggered by the elevated valuation of domestic equities and attractive valuations of Chinese stocks according to a report detailed by the Press Trust of India.

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Before this, foreign portfolio investors (FPIs) withdrew Rs 61,973 crore from equities in March 2020. The latest outflow came after a nine-month high investment of Rs 57,724 crore in September 2024, the PTI report elaborated further.

According to data from the depositories, FPIs have consistently bought equities since June after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024 except for January, April and May.

US elections, movement in interest rates, China stimulus to set the tone for FII flows

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Looking ahead, the trajectory of global events like geopolitical developments, interest rate movements, progress in the Chinese economy and the outcome of the US Presidential election will play a crucial role in shaping future foreign investment in Indian equities, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

On the domestic front, key indicators like inflation trajectory, corporate earnings, and the impact of festive season demand will also be closely watched by FPIs as they assess opportunities in the Indian market, Srivastava added.

According to the data, FPIs recorded a net outflow of Rs 94,017 crore in October. The intensity of net outflows could be understood from the fact that except for one day FPIs were net sellers throughout the month bringing their total investment for 2024 down to Rs 6,593 crore. This resulted in about an 8 per cent decline in benchmark indices from their peaks. Several factors contributed towards this massive withdrawal of foreign capital from the Indian equity markets in October.

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The major among them is the elevated valuations of Indian equities. This has triggered a shift in investments towards China, where valuations are currently more attractive. Additionally, a series of stimulus measures, aimed at bolstering Chinese economic growth has made Chinese equities increasingly appealing to global investors, Srivastava said.

Despite the massive FPI selling in financials, this sector is resilient since the valuations are fair and every selling is being absorbed by domestic institutional investors (DIIs) and individual investors, particularly high net worth individuals (HNIs), VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

In addition, FPIs pulled out Rs 4,406 crore from the debt general limit and invested Rs 100 crore from 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.