Indian stock markets volatile due to heavy selling by foreign investors as Chinese stocks become attractive

FPIs are currently net sellers, meaning they are currently selling more shares than buying. This was the case for three months, including June.

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In May, FPIs sold equity worth Rs.25,586 crore as per NSDL data, indicating a pattern of excessive selling. FPIs have sold equity worth Rs.38,158 crore over April, May and June so far, according to an ANI report.

This came after they pumped Rs.35,098 crore in Indian equities during March, the highest inflows recorded in the first three months of the calendar year, 2024, according to a Mint report.

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The main trigger for FPIs selling has been the performance of Chinese stocks. The Hang Seng index rose 8% in the first half of May, triggering selling in India and buying in Chinese stocks in the last two months, according to the Mint article.

“FPIs regard Indian valuations to be very high and, therefore, capital is getting shifted to cheaper markets,” Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services told ANI. “There is a trend of investing in Chinese stocks since the valuations have turned very attractive,” he added.

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Despite continuous selling pressure by FPIs, Indian markets are at all-time high.

The BSE Sensex touched an all-time high on Friday, while the Nifty 50 index closed positively at 23,267.75, marking a gain of 446.35 points or 1.96 percent, and hitting a high of 23,320.20, according to the ANI report.