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Foreign Institutional Investors (FIIs) have been actively selling their holdings in Indian equities, with recent reports indicating that they have offloaded approximately ₹42,000 crore in November alone, following a staggering ₹1.14 lakh crore in October. This trend has raised concerns about the health of the Indian stock market, as the total outflow since October now exceeds ₹1.55 lakh crore.
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Reasons for Selling
Analysts attribute this massive sell-off to several factors:
1.> Shift to China
There has been a notable shift of funds from India to China, where valuations are currently more attractive. The Chinese market is trading at less than half of India’s valuations, prompting FIIs to seek better returns there[1][2].
2.> Global Economic Conditions
Rising U.S. bond yields and a strengthening dollar have made the U.S. market more appealing to investors, further contributing to the outflows from India[1][4].
3.> Earnings Disappointments
Disappointing earnings reports from Indian companies have led to revised growth forecasts, adding to negative sentiment among investors[2][5].
Market Impact
The sustained selling pressure has resulted in significant declines in major indices like the Sensex and Nifty 50, which have dropped by around 11-12% over the past two months. Mid-cap and small-cap stocks have been particularly affected due to their higher sensitivity to FII flows[1][5].
Domestic Resilience
Despite the FII outflows, Domestic Institutional Investors (DIIs) have been active buyers, investing around ₹37,559 crore in November alone. This has helped cushion the impact of FII selling on the overall market[4][5].
Future Outlook
Market experts suggest that while the current trend of FII selling is concerning, it may soon taper off as valuations in India become more attractive relative to global markets. The resilience shown by certain sectors, especially IT and banking stocks, amidst this selling pressure, is seen as a positive indicator for future stability[1][4].
In summary, while FIIs continue to exit the Indian market at unprecedented levels due to various global and local factors, analysts are cautiously optimistic that this trend may soon reverse as market conditions stabilize and valuations adjust.
References
[1] Why foreign investors are exiting India
[2] FII selling continues for record continuous 37 days: Will they make a comeback any sooner?
[3] FIIs net sell shares worth Rs 5,321 crore, DIIs net buy Rs 4,200 crore
[4] Heavy FII selling in India to taper off soon, say market watchers
[5] Foreign investors pull out Rs 1.55 lakh cr from Indian stock market since Oct; sell-off intensity to decline
