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Foreign investors have withdrawn nearly Rs 20,000 crore from Indian stock markets in just five trading days (November 4–8), continuing a trend of large-scale selling that began last month. Experts say investors are now moving their money to China, largely due to the high valuations presently prevailing in Indian markets. In early November, FPIs have offloaded as much as Rs 19,994 crore in Indian markets. The month prior, i.e., October, was one of the worst months in terms of foreign outflows, with FPIs making a net withdrawal of Rs 94,017 crore. Before this, Indian markets faced such a situation during the pandemic, when FPIs withdrew Rs 61,973 crore from equities in March 2020. <h2>Why Are Investors Leaving? </h2>According to Himanshu Srivastava of Morningstar Investment Research India, two main factors are driving this exodus. First is China's renewed appeal due to lower stock valuations and new economic stimulus measures. In a bid to nudge the domestic economy and bail state governments, China recently approved a 10-trillion yuan (US $1.4 trillion) package. Per reports, approximately 60% of this stimulus focuses on allowing local governments to refinance the mountain of debt on them. Srivastava explains foreign investors are also flocking to US dollar and Treasury yields, which have appreciated significantly in the recent past, leading FPIs to anticipate a stronger US economy going ahead. Moreover, high valuations in Indian markets are discouraging foreign investors from putting more money in the economy. As a result, over the past week, the selling pressure eroded Rs 74,563 crore in market value for Reliance Industries, while Bharti Airtel and ICICI Bank lost Rs 26,274 crore and Rs 22,254 crore, respectively. The combined market valuation of six of the top 10 most-valued firms dipped by Rs 1,55,721.12 crore last week. <h2> Silver linings</h2>Despite the ongoing outflux of funds since last month, November also saw unprecedented applications of about 40–50 new FPI registrations, which are eyeing to enter the Indian market. This was due to markets SEBIs recent relaxation to NRIs, permitting them to participate up to 100% and announcing measures for ease of entry and operations in India. On the other hand, FPIs invested Rs 599 crore in the debt general limit and Rs 2,896 crore in the debt voluntary retention route (VRR) during the period under review. So far this year, FPIs have invested Rs 1.06 lakh crore in the debt market. <li class="whitespace-normal break-words"></li>Going ahead, investors will be looking for certain macroeconomic cues, which include corporate earnings reports, India's inflation (CPI) and industrial production (IIP) data on November 12, the US inflation report on November 13, and wholesale price index (WPI) data on November 14.

FPIs withdraw nearly Rs 20,000 crore from equities in the last 5 trading sessions, make a beeline for China and US

New Delhi: <keyword id="19900795" type="General" weightage="20" keywordseo="foreign-investors" source="keywords">Foreign investors</keyword> pulled out a massive Rs 94,000 crore (around USD 11.2 billion) from the Indian <keyword id="19925636" type="General" weightage="20" keywordseo="stock-market" source="keywords">stock market</keyword> in October, making it the worst-ever month in terms of outflows, triggered by the elevated valuation of domestic equities and attractive valuations of <keyword id="20295104" type="General" weightage="20" keywordseo="Chinese-stocks" source="keywords">Chinese stocks</keyword>. Before this, foreign portfolio investors (FPIs) withdrew Rs 61,973 crore from equities in March 2020. The latest outflow came after a nine-month high investment of Rs 57,724 crore in September 2024. Since June, FPIs have consistently bought equities after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, except for January, April and May, data with the depositories showed. Looking ahead, the trajectory of global events like geopolitical developments, interest rate movements, progress in the Chinese economy and the outcome of the US Presidential election will play a crucial role in shaping future foreign investment in <keyword id="20014814" type="General" weightage="20" keywordseo="Indian-equities" source="keywords">Indian equities</keyword>, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said. On the domestic front, key indicators like inflation trajectory, corporate earnings, and the impact of festive season demand will also be closely watched by FPIs as they assess opportunities in the Indian market, he added. According to the data, FPIs recorded a net outflow of Rs 94,017 crore in October. The intensity of net outflows could be gauged from the fact that except for one day, FPIs were net sellers throughout the month, bringing their total investment for 2024 down to Rs 6,593 crore. This relentless selling resulted in about an 8 per cent decline in benchmark indices from their peaks. Several factors contributed towards this massive withdrawal of foreign capital from the Indian equity markets in October. The major among them is the elevated valuations of Indian equities. This has triggered a shift in investments towards China, where valuations are currently more attractive. Additionally, a series of stimulus measures, aimed at bolstering Chinese economic growth has made Chinese equities increasingly appealing to global investors, Srivastava said. Despite the massive FPI selling in financials, this sector is resilient since the valuations are fair and every selling is being absorbed by DIIs and individual investors, particularly HNIs, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said. In addition, FPIs pulled out Rs 4,406 crore from the debt general limit and invested Rs 100 crore from the debt Voluntary Retention Route (VRR) during the period under review. So far this year, FPIs invested Rs 1.06 lakh crore in the debt market.

FPIs withdraw record Rs 94,000 cr from Indian equities in Oct on attractive Chinese valuations

<ul><li><keyword id="30067" type="General" weightage="100" keywordseo="rbi" source="Orion">RBI</keyword> has said that 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. </li><li>Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds, says Madan Fadnavis of Bank of Baroda.</li><li></li></ul> The Reserve Bank on Friday decided to discontinue the <keyword id="18349664" type="General" weightage="50" keywordseo="incremental-cash-reserve-ratio" source="Orion">Incremental Cash Reserve Ratio</keyword> (I-CRR), which was put in place to absorb surplus liquidity following the withdrawal of Rs 2,000 currency notes, in a phased manner beginning Saturday. On August 10, the RBI mandated banks to maintain an incremental cash reserve ratio (I-CRR) of 10% on the increase in their net demand and time liabilities (<keyword id="312584" type="General" weightage="20" keywordseo="NDTL" source="Orion">NDTL</keyword>) between May 19, 2023 and July 28, 2023. The measure was intended to absorb the surplus liquidity generated by various factors, including the return of Rs 2,000 notes to the banking system. "On a review, it has been decided to discontinue the I-CRR in a phased manner," the central bank said in a statement. There is surplus liquidity in system of around Rs 75,000 cr of late, according to Madan Sabnavis, chief economist at Bank of Baroda. He adds, "Releasing money in tranches helps to smoothen out liquidity and avoid sudden gush of funds." Based on an assessment of current and evolving liquidity conditions, it has been decided that the amounts impounded under the I-CRR would be released in stages so that system liquidity is not subjected to sudden shocks and money markets function in an orderly manner, it added. The RBI said 25% of the amount of I-CRR maintained by banks will be released on Saturday and another 25% on September 23. The rest will be released on October 7. While announcing the I-CRR, RBI Governor <keyword id="6359111" type="General" weightage="50" keywordseo="shaktikanta-das" source="Orion">Shaktikanta Das</keyword> had indicated that the provision was a temporary measure for managing the liquidity overhang. The RBI had announced that the I-CRR would be reviewed on September 8, 2023, or earlier with a view to returning the impounded funds to the banking system ahead of the festival season. Following the withdrawal of the Rs 2,000 notes, the liquidity with the banks had surged significantly, the I-CRR was aimed to absorb the excess cash. As much as 93% of Rs 2000 currency notes that were in circulation on May 19 -- the day when the currency was withdrawn from circulation -- have been returned to banks. The advance tax payments are due next week which will put pressure on liquidity further. The total value of Rs 2000 banknotes received back from circulation is Rs 3.32 lakh crore up to August 31, 2023. Fadnavis adds, "The question is whether this will be adequate next week when there are tax outflow. This is because the amount coming in of around Rs 25-27,000 cr will cover the outflow through the V3R today and will not leave much surplus." (With text inputs from PTI)

RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

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FPIs withdraw nearly Rs 20,000 crore from equities in the last 5 trading sessions, make a beeline for China and US

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FPIs withdraw record Rs 94,000 cr from Indian equities in Oct on attractive Chinese valuations

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RBI decides to withdraw incremental CRR in phased manner and release it by Oct 7

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