Global funds sell most of Indian stocks since 2022 post-record rally

By Ashutosh Joshi and Abhishek Vishnoi

Indian stocks notched their biggest outflow of foreign investor funds in 19 months last week, as some profits were booked after a record-breaking rally.

Global funds sold $2.4 billion of Indian shares on a net basis last week, the most since June 2022. They sold another $374 million on Tuesday, according to provisional data, as trading resumed after Monday’s surprise trading holiday announcement.

India’s stock market valuation briefly topped that of Hong Kong earlier this week, at over $4.3 trillion. The lead was short-lived, however, as Hong Kong rebounded on expectations for a market rescue package from Chinese policymakers.
 

Foreign investors plowed more than $21 billion into Indian equities in 2023, helping propel the market to a series of new record highs. If the newfound optimism in Beijing’s support measures is sustained, it may dent allocations that India had been winning over China amid a host of issues for the latter from regulatory crackdowns to tensions with the US.

India may be facing some regulatory headwinds of its own, which could spook overseas traders. The Securities and Exchange Board of India is committed to adopting stricter rules on foreign direct investment, despite opposition, the Economic Times reported, citing a person with direct knowledge of the matter.

Disappointing results from some major Indian companies may further sour the mood on the local market as well. Large banks have signaled a potential slowdown in loan growth, while the country’s largest firm Reliance Industries Ltd. reported a negative impact from its traditional oil-to-chemicals business.