Foreign investors have pulled out a massive sum from Indian stock markets in October, raising questions about the country’s appeal. As per data, a net Rs. 94,000 crores were withdrawn by foreign portfolio investors (FPIs) last month, the highest monthly outflow on record.
The sustained selling pressure exerted by FPIs has pulled domestic markets lower, with key indices now down around 8% from their recent peaks. A variety of factors are said to have prompted this major shift in foreign money flows. Chief among them is concerns about expensive valuations that Indian shares had reached, reducing headroom for further upside.
Another key factor was the resurgence seen in other major emerging markets like China, which have also rolled out economic stimulus measures. This has made other regional investments more attractive, drawing away money from India. Prior to these outflows, strong inflows since the start of 2024 had boosted India’s status among foreign capital providers.
However, the huge magnitude of last month’s selling suggests this favorable view may be receding. FPIs will be closely watched to see if they resume the buyer role that helped enhance India’s status as a key emerging market investment hub over the past year. Much will depend on how domestic macros and valuations shape up versus regional peers in the coming months.
