October 2024 was the worst month for outflows on record, with foreign investors wiping out an astounding Rs 94,000 crore (about $11.2 billion) from the Indian stock market. The high values of domestic stocks and the allure of attractive valuations in the Chinese stock market drove this abrupt withdrawal.
The new outflow surpasses the Rs 61,973 crore withdrawal previously noted as a major outflow in March 2020. This is sharply different from September 2024, when foreign portfolio investors (FPIs) made a nine-month high net investment of Rs 57,724 crore.
FPIs returned to being net purchasers in the Indian equity market in June after withdrawing Rs 34,252 crore in April and May, signaling prolonged positive inflows. Due to the substantial capital infusions made by FPIs into the market during the previous months, this trend persisted until October, indicating a general preference for Indian stocks.
Nevertheless, depository data reveals a sharp reversal in October, with a net outflow of Rs 94,017 crore as FPIs only had one day of positive buying activity during the month and instead transformed into net sellers. In stark contrast to the robust inflows seen earlier in 2024, this massive selling reduced their overall net investment in Indian shares for the year to Rs 6,593 million.
The benchmark indexes have dropped by about 8% from their highest levels as a result of the aggressive selling by FPIs, underscoring the substantial influence of these outflows on market performance. During the review period, FPIs made equity withdrawals, removed Rs 4,406 crore from the debt general limit, and invested just Rs 100 crore under the debt Voluntary Retention Route (VRR).
Longer-term market patterns will be impacted by basic variables including US GDP growth, inflation, and possible interest rate decreases by the Federal Reserve, even though global markets may respond to the impending US presidential elections.
