FPIs offload ₹27,142 crore in Indian equities amid geopolitical tensions
What's the story
Foreign portfolio investors (FPIs) have reversed their three-month buying trend in Indian markets, becoming net sellers due to escalating geopolitical tensions.
This shift follows a period of aggressive purchasing in September, when FPI inflows reached a nine-month peak.
The surge was primarily driven by a significant 50 basis points interest rate reduction by the US Federal Reserve.
However, now, FPIs have halted their buying spree and offloaded ₹27,142 crore worth of Indian equities.
Outflow details
FPIs's net outflow reaches ₹23,101 crore in October
As of October 4, the net outflow from FPIs stood at ₹23,101 crore. This figure includes debt, hybrid, debt-VRR (Voluntary Retention Route), and equities.
The total investment in debt markets for this month is reported to be ₹190 crore.
These figures indicate a significant shift in FPI activity compared to previous months when they were consistent buyers post-election period and during market stability.
Market influences
Geopolitical tensions and Chinese stocks influence FPIs's strategy
Geopolitical tensions in the Middle East are a significant concern for global equity markets. Despite this, markets have largely ignored these issues with the US market remaining robust, yielding 21% returns YTD.
Dr. VK Vijayakumar from Geojit Financial Services noted that the outperformance of Chinese stocks has primarily triggered FPIs's selling spree in India.
He revealed that within three trading days in October, FIIs sold equity worth ₹30,718 crore in the cash market.
Record outflow
FPIs record largest daily outflow in 4 years
On a single day in October, FPIs sold off ₹15,243 crore worth of Indian equities. This marked the largest daily outflow by foreign investors in the past four years.
There are growing concerns about FPIs shifting their investments back to China due to Beijing's policy measures aimed at reviving its economy and strengthening its capital markets.
The Hang Seng index has seen a significant rise of 26% over the past month, further fueling these concerns.