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The Indian stock market experienced a significant correction in October 2024, fueled by a sustained selling spree from Foreign Portfolio Investors (FPIs). FPIs, seeking more attractively valued markets like China, withdrew a record ₹94,017 crore from Indian equities, a sharp reversal from the ₹57,724 crore inflows seen in September. This shift in sentiment was primarily driven by weaker domestic corporate earnings, prompting FPIs to seek better opportunities elsewhere.
The brunt of FPI outflows was felt in the financials, oil & gas, and consumer sectors. The Financial Services sector witnessed the highest outflow at ₹26,139 crore, with ₹23,274 crore sold in the first half of October alone. This significant decline stands in stark contrast to the ₹27,200 crore investment FPIs made in financial services just the previous month. Despite the massive selling, the sector is considered resilient due to fair valuations and absorption of selling by Domestic Institutional Investors (DIIs) and individual investors, particularly High Net-worth Individuals (HNIs).
The Oil, Gas & Consumable Fuels sector also faced substantial FPI outflows, totaling ₹21,444 crore. The Fast-Moving Consumer Goods (FMCG) sector followed closely with outflows of ₹11,582 crore. The Automobile and Auto Components sector saw consistent selling throughout the month, resulting in a total outflow of ₹10,440 crore. Other sectors like Consumer Services, Construction Materials, Information Technology, Consumer Durables, Capital Goods, Power, and Realty also experienced FPI selling, though to a lesser extent.
While FPIs were net sellers in the secondary market, they exhibited a contrasting behavior in the primary market, investing ₹19,842 crore in October. This divergence in investment behavior is attributed to the fair valuations of primary market issues compared to the elevated valuations seen in the benchmark indices. This suggests that FPIs may continue to sell in the secondary market, potentially limiting any upward movement in the market.
Despite the overall FPI outflow, some sectors saw renewed buying interest. The Healthcare sector witnessed a net inflow of ₹2,321 crore in the second half of October, offsetting earlier outflows. Other sectors that attracted minor FPI buying included Chemicals, Utilities, and Metals & Mining, with inflows totaling ₹583 crore, ₹292 crore, and ₹147 crore, respectively.