FIIs sell-off hits Rs 2 lakh crore in 2024! Here's what you need to know!

As of 2024, FIIs have already crossed Rs 2 lakh crore in net selling, with a total of Rs 2,07,512 crore

The Indian stock market has seen quite the volatility lately, especially with Foreign Institutional Investors (FIIs) heavily pulling out funds. But what's really driving this massive outflow, and how have domestic investors reacted? Let’s dive into the numbers and key insights to understand the situation better.

Today, the market dropped over 1 per cent, with the Sensex hovering around 81,150, and the Nifty trading below the 25,000 mark at 24,781. Mid-Cap and Small-Cap indices also saw significant declines, falling 2.6 per cent and 3.9 per cent respectively.

An interesting trend to note is the FII activity. Over the past year, FIIs have hit record levels of selling. The last significant sell-off occurred in May and April, when FIIs sold Rs 42,214 crore and Rs 35,692 crore, respectively. But in October, FII selling surpassed those combined figures, with Rs 82,479 crore sold. On the flip side, Domestic Institutional Investors (DIIs) bought Rs 77,402 crore in the same month, cushioning the impact to a large extent.

For the past four years, DIIs have consistently been net buyers.

Which year saw the largest FII sell-off?
The largest FII sell-off occurred in 2022, when they sold a net Rs 2,78,429 crore. DIIs, however, countered this with purchases of Rs 2,76,698 crore, almost neutralizing the effect. Despite this, the Nifty 50 delivered a return of 4.32 per cent.

What’s happening in 2024?
As of 2024, FIIs have already crossed Rs 2 lakh crore in net selling, with a total of Rs 2,07,512 crore sold (YTD- October 21). Meanwhile, DIIs have made record-breaking purchases of Rs 4,18,013 crore this year, nearly double the amount sold by FIIs.

Why are FIIs selling?
FIIs are shifting their focus to China, where valuations are more attractive. China’s price-to-earnings (P/E) ratio is around 13.5x, whereas India’s is estimated at 25x. This valuation gap makes outflows from India to China quite logical from an FII perspective.

Should you sell?
For long-term investors, India still offers better growth prospects compared to China. The Indian market today is far more liquid and resilient than it was in the past. With average SIP inflows in 2024 standing at Rs 22,321 crore per month, the total SIP inflow for the year could reach Rs 2,67,850 crore, ensuring that the market remains well-supported.

Conclusion
While FII outflows may raise concerns, the strong support from DIIs and retail investors via SIPs has kept the market steady. Long-term investors should focus on India’s growth potential and stay invested rather than react to short-term market movements.