Foreign Pullback: India's Stock Market Faces FPI Exodus

Foreign investors have withdrawn Rs 22,420 crore from India’s equity market this month due to high stock valuations, China allocations, and a strong US dollar. This selling trend continues amidst global economic concerns, affecting market sentiment, and reflecting a shift towards US and Chinese markets.

The Indian equity market has seen a significant withdrawal of funds, with foreign investors pulling out Rs 22,420 crore this month. The sell-off is attributed to inflated domestic stock valuations, a pivot towards Chinese markets, and the attractiveness of the rising US dollar and Treasury yields.

Market expert Akhil Puri from Forvis Mazars suggests that the tepid nature of Foreign Portfolio Investor inflows is expected to persist until early January. In fact, FPIs recorded a net outflow following a substantial withdrawal in October, which was characterized as the most severe monthly outflow this year.

Analysts, including V K Vijayakumar of Geojit Financial Services, attribute the trend to a combination of high valuations in India, potential earnings downgrades, and geopolitical dynamics such as the US Presidential election. The situation contrasts with the US market, which is currently enjoying a different wave of optimism, boosting economic prospects there.

(With inputs from agencies.)