Chinese stock’s outperformance triggers FPI selling in India.
Foreign investors have sold Indian equities over the past few months due to domestic markets’ comparative underperformance against China. Latest data from National Securities Depository Limited shows that foreign portfolio investors (FPIs) have sold shares worth over Rs 14,794 crore in June so far. They sold equities worth Rs 25,586 crore and Rs 38,158 crore in May and April-June, respectively.
In contrast, FPIs were net buyers in March, infusing Rs 35,098 crore—the highest amount in the first three months of 2024.
The surge in Chinese stocks has prompted this shift in FPI strategy. The Hang Seng index in Hong Kong rose 8% in mid-May, drawing investment flows to Chinese counters.
“FPIs view Indian valuations as expensive and are rotating capital to more reasonably priced markets. They are investors in Chinese equities where valuations have improved,” said Dr. V K Vijayakumar from Geojit Financial Services.
However, Indian markets continued to surpass previous highs. The BSE Sensex and NSE Nifty 50 closed the week at record levels of 62,871.93 points and 23,267.75, respectively, notching up weekly gains of around 2%.
Going forward, FPI actions will depend on factors like relative macroeconomic growth and risk-adjusted returns between the two key Asian economies.
