Foreign Portfolio Investors (FPIs) have pulled ₹22,420 crore from Indian equity markets in November 2024, marking a challenging phase for foreign investments in the country. High stock valuations, increased allocations to Chinese and US markets, and a stronger US dollar with rising Treasury yields are driving this significant outflow.
According to PTI, these withdrawals bring the cumulative FPI outflows from Indian equities in 2024 to ₹15,827 crore, underlining a difficult year for Indian markets. Experts predict that global liquidity constraints and macroeconomic pressures will likely keep FPI inflows subdued, at least until early 2025.
Record-Breaking October Exodus
The November outflows follow a record-breaking exodus of ₹94,017 crore in October, the worst monthly FPI outflow in history. For context, the only similar retreat occurred in March 2020 when the pandemic triggered global market uncertainties, leading to a ₹61,973 crore withdrawal.
Interestingly, September 2024 provided a contrasting narrative, with FPIs injecting ₹57,724 crore into Indian equities—the highest in nine months.
What’s Driving FPI Sentiment?
Market experts cite multiple factors behind the sustained outflows. Elevated stock valuations, concerns over potential corporate earnings downgrades, and a global reallocation of investments—particularly towards the US and China—are the primary drivers.
However, Samir Arora, Founder of Helios Capital, disputes the notion of heavy reallocations to US or Chinese markets. Speaking at the CNBC-TV18 Global Leadership Summit in Mumbai, Arora highlighted the limited global investor exposure to Indian markets, which remains at just about 1%, compared to a staggering 60% for the US.
He also addressed the perception of political risk in China, suggesting it might not be as significant as often portrayed.
Meanwhile, V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed the “relentless FPI selling” since October to a mix of factors: high valuations, fears of an earnings downgrade, and the “Trump trade,” influenced by the upcoming US Presidential elections.
Piyush Mehta, CIO at Caprize Investments, described the current trend as a “Buy US, Sell India + other EMs” strategy, further accelerating the capital flight.
Market Impact
This trend has created a stark divergence between global and Indian market performances. While Indian markets have dropped by nearly 10% since September, US markets have surged by 10–12% during the same period. Interestingly, Chinese markets have also seen a 10% drop from their late-September peak.
Silver Lining: Debt Investments
Despite the equity sell-off, FPIs have shown interest in Indian debt markets, investing ₹1.06 lakh crore in 2024. In November, they infused ₹42 crore in the general debt limit and ₹362 crore through the Voluntary Retention Route (VRR).
Outlook for 2025
With rising macroeconomic pressures and ongoing liquidity challenges, experts suggest that Indian equity markets may remain under FPI scrutiny in the near term. However, as global markets stabilize, there is hope for renewed foreign interest in Indian assets.
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