₹1.2 trillion FPI sell-off makes 2024 second-worst year since 2014
What's the story
2024 has seen the second-highest sell-off of Indian stocks by foreign investors in a decade, with foreign portfolio investors (FPIs) selling ₹1,20,598.42 crore in secondary markets.
The trend was driven by China's stimulus package announcement, high valuations, increasing US bond yields, and disappointing second-quarter earnings.
The first nine months of the year saw strong foreign inflows into equities, but a sell-off since October resulted in net negative foreign inflows for the year.
Market dynamics
Factors influencing FPI sell-off in Indian stocks
Neeraj Chadawar of Axis Securities attributed the dip in foreign fund inflows to a strategic shift toward China in early October, rising US bond yields, and weak earnings in some market sectors in Q2.
He added that domestic investors pumped in over $60 billion into the markets during this period.
Nuvama's Abhilash Pagaria said the lack of valuation comfort in Indian markets versus other emerging markets also led to foreign outflows.
Market trends
Market performance and investor sentiment
Since the foreign sell-off started on September 27, Nifty and Sensex have corrected by 10% and 8.7%, respectively.
In December alone, overseas investors bought stocks worth ₹15,351.71 crore after selling shares worth ₹1.15 lakh crore in October and November.
Pagaria emphasized that while the China stimulus had limited impact, the Q2 earnings disappointment heavily impacted foreign investor sentiment toward Indian stocks.
Policy impact
Uncertainty over Trump's policies impacts global investors
Analysts say global investors are watching trade dynamics closely as President-elect Donald Trump prepares to take office on January 20.
Chadawar observed a divergence between US Fed's rate cut in December and rising US bond yields, implying uncertainty over Trump's policies.
He also hinted a corporate tax cut in the US could drive up inflation and reduce the chances of an interest rate cut.
Future prospects
Analysts predict foreign inflows to India in 2025
Chadawar expects if more rate cuts happen in the US, we could see foreign money returning to India, probably in H2 2025.
Green Portfolio PMS' Divam Sharma expects foreign investors to take a wait-and-watch approach before investing money in India next year.
He expects volatility in the first 3-6 months of 2025 as Trump forms his government but foreign inflows once US policy impacts settle down later in the year.