Foreign portfolio investors (FPIs) experienced a complete reversal in sentiment and turned out to be net sellers in October. The investors offloaded equity worth Rs 27,142 crore in just the first three sessions of the month due to the increasing conflict between Israel and Iran, a sharp surge in crude oil prices, and better performance seen in Chinese markets.

Prior to the outflow, the investment in equities hit a nine-month high of Rs 57,724 crore in September, official data from the depositories revealed. Since June, the investors have consistently poured funds into Indian equities after withdrawing Rs 34,252 crore in April-May, reported PTI.

The investors withdrew Rs 900 crore via the General Limit and poured in Rs 190 crore through the Voluntary Retention Route (VRR) in the debt market during the period under review. Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, noted, “Looking ahead, global factors like geopolitical developments and the future direction of interest rates will play a crucial role in determining the flow of foreign investments into the Indian equity markets.”

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, stated that the selling was majorly triggered by the outperformance of the Chinese stocks. The analyst added that in the last month, the Hang Seng index rose 26 per cent and this bullishness is estimated to continue ‘since valuations of Chinese stocks are very low and the economy is expected to do well in response to the monetary and fiscal stimulus being implemented by the Chinese authorities’. The expert pointed out that in sectors, FPIs continued selling in financials, specifically frontline banking stocks.

Srivastava explained, “Escalating geopolitical tensions, driven by the intensifying conflict between Israel and Iran, a sharp rise in crude oil prices, and the improved performance of the Chinese markets, which currently appear more attractive in terms of valuations, were the primary reasons behind the recent exodus of foreign investments from Indian equities.”