Since the record rally in 2022, global funds have sold the majority of Indian stocks

by Prasanna January 24, 2024 0 Comment

Last week, Indian stocks experienced their most substantial withdrawal of foreign investor funds in 19 months, with some profits being secured following a record-breaking rally.

Last week, global funds offloaded Indian shares amounting to a net total of $2.4 billion, marking the highest figure since June 2022. On Tuesday, provisional data indicates an additional sale of $374 million as trading resumed after the unexpected announcement of a trading holiday on Monday.

Earlier this week, India’s stock market valuation briefly exceeded that of Hong Kong, reaching over $4.3 trillion. However, this lead was short-lived, as Hong Kong rebounded due to expectations of a market rescue package from Chinese policymakers.

In 2023, investors infused over $21 billion into Indian equities, contributing to the market’s achievement of multiple record highs. However, if the sustained optimism regarding Beijing’s support measures endures, it could impact the allocations that India had been securing over China. This shift comes amid various issues faced by China, including regulatory crackdowns and tensions with the US.

India could encounter regulatory challenges of its own that might unsettle foreign traders. According to an insider cited by the Economic Times, the Securities and Exchange Board of India is determined to implement more stringent rules on foreign direct investment, despite facing opposition.

Unfavorable outcomes from certain prominent Indian companies could deepen the negative sentiment in the local market. Major banks have indicated a potential deceleration in loan growth, and Reliance Industries Ltd., the country’s largest firm, reported adverse effects from its conventional oil-to-chemicals business.