- Foreign Portfolio Investors sold Indian stocks worth Rs35,861 crore in September on net basis
- October began with FPIs offloading Rs9,232 crore amid global economic uncertainties
- US 30-year treasury yield hit a two-decade high of 5.48%, reducing equity appeal
Foreign Portfolio Investors engaged in hefty selloffs of Indian equities in September and dumped stocks worth Rs 35,861 crore on a net basis. October also began on a negative note, with the selloff standing at Rs 9,232 crore.
The selloff follows robust investments by FPIs in the months of July (Rs 20,200 crore) and August (Rs 29,631 crore) on a net basis. West Asia war's energy shock ripples, weakness of the Indian currency, and US 30-year yield touching multi-decadel high (5.4%) is something that was already established, but analysts have added another to the list: portfolio rotation.
"FPIs turned heavy sellers in September. The positive FPI flows in July and August on expectations of decline in crude prices turned out to be a temporary phenomenon," stated V K Vijayakumar, Chief Investment Strategist, Geojit Investments.
Here's a closer look at why overseas investors have strayed away from the Indian stock market:
US Bond Yields
The 30-year US treasury yield touched a two-decade high, standing at 5.48% roughly a week ago. Treasury yields have a converse relationship with equities and tend to put pressure on their appeal. At the same time, the US 10-year yield touched 5.3% in the last week.
"Treasury yields hovered near multidecade highs Friday as investors looked past slower-than-expected job creation in the U.S. amid lingering concerns about the long-term economic outlook," said Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth.
Oil On The Boil
Crude oil prices have continuously rallied, with only brief bouts of respite. Brent crude prices have remained above $100 per barrel for the better half of September. The rally took a breather when Saudi Arabia reportedly transported some crude via Strait of Hormuz to compensate for the closure of a key pipeline.
US-Iran War
The primary catalyst for all of this havoc remains the on-going (and seemingly never-ending) West Asia conflict between America and Iran. The war, which began in February of 2026, has rattled economies, markets and countries (along with their people) across the globe.
So far, there has been little to no indication of truce talks being resumed from either ends, making the conflict an ever bigger overhang for overseas investors and keeping them cautious regarding Indian equities as well.
Indian Rupee's Fall
The Indian currency weakened against the US dollar substantially, crossing 96 per dollar levels time and again. The depreciation in the currency has exposed its vulnerability to the oil shock and global yields, as per experts.
Portfolio Rotation
Lastly, with global investors finding attractive opportunities in dollar assets and parts of the Asian technology heavy markets, India has had to compete harder for incremental foreign capital – the significantly reduced “non-AI” trade, Gaur from Choice Wealth pointed out.
What To Look Out For?
Going Ahead, FPIs are expected to be watchful of some key domestic factors, such as the monetary policy decision and guidance, India's manufacturing growth (PMI data), Q2 corporate earnings and IPO performances; along with global developments in the context of the Iran war, crude oil, global bond yields.
"The most important event is the RBI Monetary Policy Committee meeting from October 5–7, with the policy decision on October 7. A Reuters poll showed around 60% of economists expecting a 25-bps hike, amid rising inflation, crude prices and rupee pressure," Gaur from Choice Wealth said.
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