This week, global funds have recorded an all-time high net selling of Indian equities, marking the largest net sell-off by global funds in the Indian stock market since January 1, 1999.

Data from the Securities and Exchange Board of India (SEBI) shows that on October 3rd, global funds net sold $101.7 million worth of Indian bonds; according to exchange data, on the same day, global funds net sold $1.85 billion worth of Indian stocks, reaching a record high level.

The data indicates that from October 1st to 4th, foreign capital withdrew a net amount of 271.42 billion rupees from the Indian stock market, with October 2nd being a trading holiday.

Morningstar analyst Srivastava added that escalating geopolitical tensions, a significant increase in crude oil prices, improved performance in the Chinese market, and currently more attractive valuations are the main reasons for the recent withdrawal of foreign capital from the Indian stock market.

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Geojit Financial Services analyst VK Vijayakumar stated:

The selling was primarily triggered by the outstanding performance of Chinese stocks, with the Hang Seng Index in Hong Kong rising by 26% last month, and this bullish sentiment is expected to continue. Chinese stocks are very undervalued, and the economy is anticipated to perform well under the latest monetary and fiscal policies.

The significant outflow of foreign capital, in turn, has led to a substantial correction in the Indian stock market recently, with the Indian stock index falling by more than 4.4% this week. On Friday (October 4th), the CNX Nifty index of blue-chip stocks on the National Stock Exchange of India closed down by 0.93%, at 25,014.60 points, continuing to fall away from the historical closing high of 26,216.05 points set on September 26th and the intraday historical high of 26,277.35 points set on September 27th, with a cumulative decline of 4.45% for the week (four trading days, with the market closed on October 2nd).

In terms of sectors, foreign investment funds mainly sold financial stocks, especially high-quality bank stocks, making these stocks attractively valued.

So far this year, foreign funds have invested 734.68 billion rupees in the Indian stock market and 110 million rupees in the bond market. It is worth noting that foreign capital has been net buying Indian stocks except in January, April, and May. Analysis suggests that geopolitical developments and future global interest rate trends will be key in determining the flow of foreign capital in the Indian stock market.