China's stock market has staged the largest-scale rise since 2008, becoming the focus of global capital. Now the market is concerned about whether the massive ship of overseas funds will adjust its course and head towards China amidst the cheers.

Taking the Indian stock market as an example, Goldman Sachs has already answered: "Without a doubt, yes."

The latest data shows that the net selling scale of global funds for Indian stocks has reached a record high, and the Indian stock market has encountered the largest net selling by global funds since at least January 1, 1999. Analysis indicates that the recent selling was mainly triggered by the excellent performance of the Chinese market, with the Hang Seng Index in Hong Kong rising by 26% last month, and the bullish sentiment is expected to continue.

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When the Chinese stock market stages a "fierce" buying spree, the Indian market will become vulnerable.

Considering that the Indian Nifty Index fell by 4.5% last week, marking the worst weekly performance since June 2022. According to Goldman Sachs India trader Nikhilesh Kasi, the most frequently asked question by clients in the past two weeks has been "Are we seeing funds flowing from India to China?" In response to this, Kasi has clearly answered: "Yes". And explained that, based on the fund flows they have observed, this trend is very obvious.

Kasi said that the Indian stock market is the second most over-allocated market among emerging markets. More importantly, India ranks second in terms of weight among all emerging markets.

This means that when there is a "fierce" buying spree in China as it is now, the Indian market will become vulnerable.

Last week, foreign institutional investors sold about $4.5 billion, which was the largest single-week selling in the history of the Indian stock market, and this happened even with only four trading days.

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

The chart above shows a sell-off amount of $3.2 billion, as it does not include the temporary estimated $1.2 billion sell-off on Friday.

Kasi believes that foreign institutional investors are selling their most abundant and most liquid assets in order to extract the maximum liquidity in the shortest time.

He also stated that the intensity of selling by Goldman Sachs' clients is twice as much as before, and this process is mainly driven by long-only strategy funds (LO).