Foreign investors turned net sellers in October, offloading shares worth Rs 27,142 crore in just the first three days of October due to intensifying conflict between Israel and Iran, a sharp rise in crude oil prices, and improved performance of Chinese markets.

The outflow came after FPI investment reached a nine-month high of Rs 57,724 crore in September.

Since June, Foreign Portfolio Investors (FPIs) have consistently bought equities after withdrawing Rs 34,252 crore in April-May. Overall, FPIs have been net buyers in 2024, except for January, April, and May, data with the depositories showed.

Looking ahead, global factors like geopolitical developments and the future direction of interest rates will play a crucial role in determining the flow of foreign investments into the Indian equity markets, Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

According to the data, FPIs made a net withdrawal of Rs 27,142 crore from equities between October 1 and 4, with October 2 being a trading holiday.

"The selling has been mainly triggered by the outperformance of Chinese stocks," VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

The Hang Seng index shot up by 26 per cent per cent in the last one month, and this bullishness is expected to continue since valuations of Chinese stocks are very low and the economy is expected to do well in response to the monetary and fiscal stimulus being implemented by the Chinese authorities, he added.

"Escalating geopolitical tensions, driven by the intensifying conflict between Israel and Iran, a sharp rise in crude oil prices, and the improved performance of the Chinese markets, which currently appear more attractive in terms of valuations, were the primary reasons behind the recent exodus of foreign investments from Indian equities," Morningstar's Srivastava said.

This, in turn, has contributed to the recent sharp correction in the Indian equity markets.

In terms of sector, massive FPIs selling in financials, especially frontline banking stocks, have made their valuations attractive. Long-term domestic investors may utilise this opportunity to buy high-quality banking stocks, Vijayakumar said.

In the debt markets, FPIs pulled out 900 crore through the General Limit and invested Rs 190 crore via Voluntary Retention Route (VRR) during the period under review.

So far this year, FPIs Invested Rs 73,468 crore in equities and Rs 1.09 lakh lakh crore in the debt market.

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