MUMBAI: Continuing a broader sell-off observed since October, Foreign Institutional Investors (FIIs) remain net sellers in the Indian equity markets, pulling out approximately Rs 23,000 crore from the stock market in just the first week of November 2024.

In October 2024, FIIs sold a net of Rs 114,445.89 crore, marking the highest monthly selling by FIIs. Previously in 2024, the highest net sales by FIIs occurred in May, with Rs 42,214 crore worth of Indian equities sold. The last major sell-off was during the COVID-19 crash in March 2020, when FIIs sold Rs 65,816.70 crore, leading to a more than 20% decline in the Nifty.

Experts attribute this recent exodus of foreign funds to multiple factors. A prominent argument is the “Buy China, Sell India” sentiment, driven by attractive stimulus measures from the Chinese government, making Chinese markets more appealing to investors. Additionally, high inflation, which reached 5.49% in September—its highest level this year—has weighed on market sentiment.

Disappointing earnings reports for the second quarter of 2024 have also raised concerns over the high valuations of Indian stocks, prompting investors to reassess their positions. Several funds have raised concerns about earnings expectations for FY25. The American investment bank and financial services company Jefferies has cut FY25 earnings estimates for 63% of the 121 companies it tracks that have reported Q2FY25 results, marking the highest downgrade ratio since early 2020.

The impact of this sell-off has been significant, with the Indian stock market declining 6.5% in October 2024. The financial services sector has been particularly hard-hit, with FIIs offloading Rs 23,274 crore from this sector alone in just 15 days, reflecting a marked shift in investment strategies.

According to a report by PTI, the combined market valuation of six of the top-10 most-valued firms eroded by Rs 1,55,721.12 crore last week, with Reliance Industries being the biggest laggard, consistent with a broader weak trend in equities. Reliance Industries’ valuation fell by Rs 74,563.37 crore to Rs 17,37,556.68 crore.

In addition to Reliance Industries, stocks like Bharti Airtel, ICICI Bank, ITC, Hindustan Unilever, and the Life Insurance Corporation of India (LIC) saw declines in their market valuations, while Tata Consultancy Services (TCS), HDFC Bank, Infosys, and the State Bank of India were gainers. Bharti Airtel’s valuation dropped by Rs 26,274.75 crore to Rs 8,94,024.60 crore. Last week, the BSE benchmark declined by 237.8 points, or 0.29%.

Despite this downturn, domestic institutional investors (DIIs) have played a crucial role in stabilizing the market, purchasing approximately Rs 1.07 lakh crore worth of equities during this period.

Experts remain optimistic about continued global investor interest despite recent volatility, noting that, while there has been a sell-off, around 50 new foreign portfolio investors (FPIs) have registered to enter the Indian market. This is seen as a sign that foreign investors may take renewed or fresh positions in the markets.