FPI Selling Eases, but October Records Historic Rs 77,701 Crore Sell-Off

Foreign Portfolio Investors (FPIs) continued to sell Indian equities this week, although at a slower pace compared to the previous week, as per data from the National Securities Depository Limited (NSDL). Between October 14 and October 18, FPIs sold shares worth Rs 19,065.79 crore, a significant reduction from the Rs 31,568.03 crore sold the previous week.

Despite the slower pace of selling, October has seen historic FPI outflows, with net sales of Rs 77,701 crore in equities so far. This surpasses the March 2020 sell-off during the COVID-19 pandemic, when Rs 61,972.75 crore was offloaded, making October the highest monthly sell-off on record.

Factors Behind the Sell-Off

Ajay Bagga, a banking and market expert, attributed the outflows to several global economic factors. “The markets expected regular, sharp Federal Reserve rate cuts after the surprising 50 bps cut in September. However, strong US economic data and rising US yields, along with a strengthening US dollar, have negatively impacted emerging market flows, including India,” Bagga told media. He also pointed out that the China stimulus announcement contributed to a rise in Chinese markets, further diverting investment away from India.

Resilience of Indian Stock Markets

Despite the heavy FPI selling, key Indian stock indices like the Nifty 50 and Sensex have remained resilient. Both indices are down only about 5% from their 52-week highs, indicating strong support from domestic investors. Data from the National Stock Exchange (NSE) revealed that Domestic Institutional Investors (DIIs) and other domestic investors injected Rs 74,176.20 crore into equities in October, helping offset the FPI sell-off.

Bagga noted that India’s historically high market valuations, slowing economy, persistent inflation, and high interest rates have contributed to FPI outflows. He also highlighted underwhelming earnings across sectors as a factor. However, the strong domestic participation underscores the increasing role of local investors in stabilizing Indian markets during periods of heavy foreign outflows.