So far in November, FPI has withdrawn Rs 22,420 crore from the stock market, will the selling stop now?

Foreign investors have pulled out Rs 22,420 crore from the Indian equity market so far this month due to high valuations of the domestic stock market, rising allocations to China, and a rise in the US dollar as well as treasury yields. With this sell-off, foreign portfolio investors (FPIs) have pulled out a total of Rs 15,827 crore so far in 2024. Akhil Puri, partner, and financial advisor, Forvis Measures in India, said that FPI flows are expected to remain low in the short term as liquidity remains low.

Little hope of improvement in the short-term

A positive change in FPI activity is unlikely before the beginning of January, keeping the overall market sentiment weak. According to the data, FPIs have registered a net withdrawal of Rs 22,420 crore so far this month. This comes after a net withdrawal of Rs 94,017 crore in October, which was the worst monthly withdrawal. Earlier, in March 2020, FPIs withdrew Rs 61,973 crore from equities. In September 2024, foreign investors invested at a nine-month high of Rs 57,724 crore.

Why is the sell-off happening?

VK Vijayakumar, Chief Investment Strategist, at Geojit Financial Services, said that the continuous selling by FPIs since October has been due to the combined effect of three factors. These factors are high valuations in India, concerns over a decline in earnings, and sentiments being affected due to Donald Trump’s victory in the US presidential election. On the other hand, FPIs invested Rs 42 crore in the Debt General Limit and Rs 362 crore in the Debt Voluntary Retention Route (VRR) during the period under review. So far this year, FPIs have invested Rs 1.06 lakh crore in the debt market.