Domestic Investors Cushioned Indian Equities Amid Historic FPI Outflows

Foreign investors continued selling Indian equities this week, albeit at a decreased intensity. October has witnessed one of the highest FPI sell-offs, surpassing March 2020 levels. Despite this, local investors have injected capital, stabilizing markets. Key indices like Nifty 50 and Sensex remain resilient, cushioning against a severe downturn.

This week saw a continuation of foreign investor sell-off in Indian equities, albeit at a less aggressive pace compared to earlier. Data from the National Securities Depository Limited (NSDL) indicates that between October 14 and October 18, Foreign Portfolio Investors (FPIs) sold Indian equities worth Rs19,065.79 crore. This is a noted decline from the previous week's offload of Rs31,568.03 crore.

October has turned into a record month for FPI's selling spree, with the current net equity sell-off soaring to Rs77,701 crore, overtaking the tumultuous March 2020 figures of Rs61,972.75 crore. Market expert Ajay Bagga remarked on factors affecting these outflows, citing regular US Federal Reserve rate cuts and a robust economic showing in the US, bolstering the strong dollar and elevated US yields – unfavorably affecting emerging market flows.

Despite the significant FPI withdrawals, domestic investors have demonstrated resilience. Key stock indices like Nifty 50 and Sensex are down merely 5 percent from their 52-week highs, supported by domestic capital injections of Rs74,176.20 crore in October alone. This robust domestic participation mitigates the negative impact of foreign outflows, highlighting the crucial role of local investors in the Indian markets.

(With inputs from agencies.)