Foreign investors continued selling Indian equities this week, though at a slower pace compared to the previous week, according to data from the National Securities Depository Limited (NSDL).
Between October 14 and October 18, Foreign Portfolio Investors (FPIs) sold Indian equities worth Rs19,065.79 crore. This marks a significant reduction from the previous week, when FPIs offloaded equities worth Rs31,568.03 crore.
Despite the slower sell-off, October has recorded the highest FPI outflows in recent history. So far this month, foreign investors have sold a net Rs77,701 crore in equities, surpassing the COVID-19-induced sell-off of March 2020, when Rs61,972.75 crore was offloaded. This makes October a historic month for heavy selling pressure by FPIs.
Ajay Bagga, a banking and market expert, told ANI, “The markets had factored in regular, sharp Federal Reserve rate cuts after the surprising 50 bps cut in September. However, US economic data since then has shown a strong economy, with a ‘no-landing’ scenario. This has led to a strong US dollar, which has risen over the past three weeks. US yields have also increased. These factors have a negative correlation with emerging market flows. India’s FII outflows were partly due to this, as well as the China stimulus announcement, which led to a sharp rise in Chinese markets.”
Interestingly, despite the significant sell-off, key stock market indices like the Nifty 50 and Sensex have shown resilience. Both indices are down by only around 5 per cent from their 52-week highs, indicating strong support from domestic investors.
Data from the National Stock Exchange (NSE) shows that domestic investors, including Domestic Institutional Investors (DIIs), have injected significant capital into the market. In October alone, they invested Rs74,176.20 crore in equities, helping to absorb the selling pressure from FPIs and preventing a more severe downturn.
“India represents elevated market levels with historically high valuations, which seem over-exuberant given the slowing economy, persistent inflation, high taxes, and high interest rates. On top of this unfavourable macroeconomic environment, we have seen underwhelming earnings announcements across sectors. This has contributed to the continued FII outflows from Indian markets,” Bagga added.
The dynamic between foreign outflows and strong domestic participation underscores the growing importance of local investors in stabilising the Indian stock market, even during periods of heavy global investor selling.