What’s triggering foreign investors to sell Indian Equities.

The News

In the past 30 days, Foreign Institutional Investors (FIIs) have sold ₹96,204 crores of Indian shares. October marks the highest-ever monthly outflows, witnessing ₹82,480 crores net sales by foreign investors.

On the flip side, domestic institutional investors (DIIs) such as mutual funds, banks, and insurance companies have invested more than ₹1 lakh crores. 

The earlier highest selling by FIIs was ₹61,973 crores, in March 2020 because of covid-19 breakout. And we all know how sharply Indian markets fell. Though the heavy selling has put pressure on the markets, DIIs neutralized so far, most of it. Causing the Nifty 50 to drop only about 5% in October.

Let’s understand what led FIIs to this. And importantly, how could it affect our markets?

Why are FIIs leaving India?

China over India
China has announced an economic package of over $400 billion to boost its economy. It came when the Chinese stock market hit a 17-year low. It became an attractive destination for investors, resulting in ‘Sell India, Buy China’ trend.

Profit booking
Since the start of this financial year, SIP contributions in mutual funds have consistently hit all-time highs. With limited cash-holding options, mutual funds are driving markets upward, leading FIIs to book profits at market peaks.

Is it something to worry about?

Well, in the past 29 years (from 1996 to 2022), there have been 25 instances of where Nifty 50 fell over 10%. So history tells us that such market falls are common and it happens nearly every year.

To conclude

While the current FII sell-off might seem alarming, domestic investors continue to show confidence, cushioning the impact of FII outflows.

Historically, downturns have always bounced back, creating opportunities for those who stay calm during uncertain times and invest when markets are falling.