The Indian stock market has experienced a significant downturn in October, with foreign portfolio investors (FPIs) offloading a record Rs 94,000 crore (approximately $11.2 billion) in shares. This represents the largest monthly outflow of foreign investments in Indian market history, eclipsing the previous record of Rs 61,973 crore set in March 2020, during the early days of the COVID-19 pandemic. This sharp sell-off has caused benchmark indices to decline by 8 percent from their recent highs, raising concerns among market participants.
Despite the typically buoyant festive season, October has proven challenging for India’s equity markets. Key factors contributing to this massive withdrawal include high valuations within the Indian market, which some foreign investors perceive as overvalued when compared to more attractively priced stocks in regions like China. The recent economic stimulus measures introduced by the Chinese government have made its markets increasingly appealing, drawing foreign capital away from India.
In a stark contrast to the previous month, where FPIs purchased Rs 57,724 crore worth of Indian stocks in September—marking a nine-month high—October saw a nearly continuous sell-off. Until then, FPIs had been net buyers for most of 2024, with only brief withdrawals in April and May totaling Rs 34,252 crore. This sharp reversal has significantly diminished net foreign investments in Indian equities, reducing it to Rs 6,593 crore for the year.
Furthermore, the impact of FPIs was also felt in the debt market, where they withdrew Rs 4,406 crore from general debt investments, although they did invest Rs 100 crore via the Voluntary Retention Route (VRR). Overall, foreign investments in the debt sector have reached Rs 1.06 lakh crore for the year, reflecting a complex investment landscape as investors reassess their strategies in light of recent developments.
