FIIs Sell Nearly ₹21,000 Crore in September After Two Months of Buying

Foreign institutional investors have pulled nearly ₹21,000 crore from Indian equities in September, reversing course after turning net buyers in July and August. 

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The renewed selling has come as global conditions have become less supportive for emerging markets. Crude oil prices above $100 a barrel, elevated US bond yields and India’s valuation premium over other emerging markets are among the factors influencing foreign allocations, according to market experts cited in the report. 

At the same time, foreign investors have continued to participate in IPOs, qualified institutional placements and block deals. That contrast between primary and secondary markets has led experts to view the recent selling as increasingly selective rather than a broad withdrawal from India. 

Crude oil and US yields weigh on flows 

Market expert Sunil Subramaniam pointed to sustained Brent crude prices above $100 a barrel as one of the pressures facing India. 

He said an extended period of oil at those levels could affect the country’s macroeconomic profile and increase risks for sectors linked to crude imports. 

US bond yields are another factor being watched. According to Subramaniam, the US 10-year Treasury yield remaining above 5% could raise the equity risk-free rate and influence the movement of capital into emerging markets. 

India’s relative valuation is also part of the equation. Subramaniam noted that the Indian market was trading at a 98% premium to the MSCI Emerging Markets index at the end of August. In his assessment, projected earnings growth among the country’s top 150 stocks did not support a broad deployment of growth capital at those valuations. 

Foreign investors remain active in primary market 

While foreign investors have been selling in the secondary market, their participation in new issues and other primary-market transactions has continued. 

Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth, pointed to foreign participation in IPOs, QIPs and block deals as evidence of this distinction. 

The ₹22,562-crore NSE IPO was cited as one example. The issue was fully subscribed within two days, even as foreign selling continued in already-listed equities. 

The difference suggests that overseas investors are not treating all Indian assets in the same way. Instead, the report indicates that capital is being directed towards selected opportunities while exposure elsewhere is being reduced. 

Long-term India interest remains in focus 

Despite the September outflows, Subramaniam said India’s longer-term investment case remains relevant for sovereign wealth funds and pension funds looking for visible growth with moderate risk. 

Gaur also linked the immediate pressure on flows more closely to global liquidity and macroeconomic conditions than to an India-specific earnings problem. His assessment was that the near-term bias could remain negative without necessarily signalling a structurally bearish view on India. 

Attention will now turn to how foreign investors approach upcoming primary-market transactions. 

The NSE listing on September 24 is one event being watched for indications of demand for large new offerings. Participation in IPOs, QIPs and block deals will also provide further evidence of how overseas investors are allocating money while reducing exposure in the secondary market. 

For listed equities, crude oil prices, US bond yields, the rupee and geopolitical developments remain among the factors likely to influence foreign flows in the near term.