Foreign Portfolio Investors Withdraw ₹34,843 Crore from Indian Equities in October

Foreign portfolio investors (FPIs) withdrew ₹34,843 crore from Indian equities in October, marking the second consecutive month of heavy outflows amid concerns over elevated crude oil prices, global interest rates, and the corporate earnings outlook.

Despite the monthly outflow, foreign investors turned net buyers towards the end of the month. FPIs infused around ₹6,300 crore during October 26-30, compared to net outflows of nearly ₹2,700 crore in the week ended October 23. Data from the Central Depository Services Ltd (CDSL) indicates that FPIs previously withdrew ₹35,861 crore in September, following investments of ₹20,200 crore in July and ₹29,631 crore in August. With the latest withdrawals, cumulative FPI outflows from Indian equities have reached ₹2.95 lakh crore.

Market experts noted that while the recent improvement in flows signals a shift in near-term sentiment, a single week of buying does not necessarily indicate a sustained reversal. Anand K Rathi, co-founder of MIRA Money, stated that foreign selling remained significant throughout October, driven by concerns around crude prices, global interest rates, and corporate earnings. Rathi explained that higher crude prices pose risks to India's inflation and corporate margins, while attractive yields in the US continue to influence global capital allocation. He added that the sustainability of the recent improvement in foreign flows depends on greater clarity on global macroeconomic conditions, crude prices, and the earnings outlook, while domestic institutional investors have played an important role in absorbing foreign selling and supporting market stability.

FPIs were net buyers in three of the four trading sessions ending October 30 in the cash market, signalling a possible improvement in their outlook towards Indian equities. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, suggested that the US Federal Reserve's decision to hold interest rates, attractive valuations in Indian large-cap stocks, and signs of sustained domestic economic growth could have contributed to the change in investor sentiment. He also noted that the weakening of global AI trade could be another factor influencing portfolio allocation. The improvement in FPI flows further helped the Nifty reclaim the 23,000 level.

Regarding sector-specific movements, Vijayakumar observed that while foreign investors continued to sell large-cap financial stocks, they selectively accumulated pharmaceutical and healthcare stocks, along with select digital platform companies. Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, noted that the reversal in FPI flows was encouraging for market sentiment, though elevated crude prices and global event risks could limit momentum.

Market participants are expected to closely track several near-term drivers, including the outcome of the US mid-term elections, movements in Brent crude prices, developments in the US-Iran and Russia-Ukraine conflicts, and ongoing quarterly earnings announcements.

"The recent data highlights the volatility in foreign capital flows driven by global macroeconomic factors such as crude oil prices and US interest rates. While the late-month net buying and the resilience shown by domestic institutional investors provide a cushion, startups and businesses must remain cautious and agile in navigating broader market sentiment and shifting capital allocation trends in the near term." — Dr. Shishir Gupta, Founder & CEO, StartupLanes