New Delhi: Foreign investors have pulled out Rs 26,533 crore from the Indian equity market this month so far owing to increasing allocations to China, concerns over muted corporate earnings and elevated valuation of domestic stocks.

While the sell-off continues, the quantum of net outflows has significantly reduced compared to October, when Foreign Portfolio Investors (FPI) withdrew Rs 94,017 crore ($11.2 billion) on a net basis. With the latest pull-out, FPI outflows on a net basis are Rs 19,940 crore in 2024 so far.

Going ahead, the flows from foreign investors into the Indian equity markets would depend on the policies implemented under Donald Trump’s presidency, the prevailing inflation and interest rate dynamics, the trajectory of the geopolitical landscape, and the third-quarter earnings performance of Indian companies, Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, said.

According to the data, FPIs recorded a net outflow of Rs 26,533 crore so far this month (till November 22). This came following a net withdrawal of Rs 94,017 crore in October, which was the worst monthly outflow. However, in September, foreign investors made a nine-month high investment of Rs 57,724 crore.

Concerns over the elevated valuations of Indian equities persist, prompting FPIs to redirect their attention toward markets offering more attractive valuations, Srivastava said. Additionally, China continues to draw significant foreign inflows at India’s expense, bolstered by its compelling valuation levels and the recent announcement of stimulus measures aimed at revitalizing its slowing economy, he said.

Furthermore, India’s sub-par corporate earnings and elevated inflation figures have raised concerns about potential delays in domestic interest rate cuts, he added. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, flagged investors’ concerns surrounding FY25 earnings. He added that while the ‘Sell India, Buy China’ trade is over, ‘the Trump trade’ also appears to be on its last leg since valuations have reached high levels in the US.

In terms of sectors, FPIs have been buying IT stocks while banking stocks have been resilient despite facing selling pressure, mainly due to support from domestic institutional investors. On the other hand, FPIs withdrew Rs 1,110 crore from the debt general limit and invested Rs 872 crore in the debt Voluntary Retention Route (VRR) this month until November 22. So far this year, FPIs invested Rs 1.05 trillion in the debt market.