Foreign portfolio investors (FPIs) staged a strong comeback to Indian equities in October, reversing three consecutive months of outflows. France led the resurgence with a massive $2.58 billion investment in equities and nearly $152 million in debt, according to data from the National Securities Depository Ltd (NSDL).
Overall, FPIs injected more than $1.66 billion into Indian equities during the month. The United States and Germany followed with approximately $520 million each in equity inflows, while contributing $765 million and $309 million, respectively, to debt instruments. The renewed interest was fueled by robust corporate earnings, a rate cut by the US Federal Reserve, and growing optimism around potential progress in US-India trade negotiations.
Ireland and Malaysia joined the buying spree, investing $400 million and $342 million in equities, along with $138 million and $68 million in debt, respectively. Hong Kong added $177 million to equities, while Denmark and Norway each contributed around $100 million. Singapore, despite recording an equity outflow of $98 million, offset the decline with over $260 million in debt purchases. Other countries collectively sold more than $3 billion in October.
The surge in foreign inflows coincided with a strong market rally, with both the Sensex and Nifty climbing 4.5 percent during the month.
However, the trend reversed in early November as foreign institutional investors (FIIs) ramped up short selling, outpacing domestic institutional and retail buying. Analysts warned that the reallocation of funds to cheaper global markets has intensified shorting activity. While short covering could trigger a reversal, they noted that no immediate catalysts are visible.
The recent FII selling has pressured prices of fundamentally strong large-cap stocks, particularly in banking and pharmaceuticals, where long-term growth prospects remain intact.
