Foreign investors are aggressively selling Indian stocks.
On October 15th, preliminary data released by the National Stock Exchange of India showed that foreign investors sold 37.316 billion Indian rupees (approximately 3.15 billion yuan) worth of stocks on October 14th, marking the 11th consecutive day of net sales. From October 1st to 14th this year, foreign investors have sold a total of 621.26 billion Indian rupees (approximately 52 billion yuan) worth of Indian stocks.
Analysts point out that foreign investment behavior in the Indian stock market is undergoing significant changes, and the selling trend may continue in the short term. The market will closely monitor the data in the coming weeks and its impact on the stability and growth prospects of the Indian market.
Due to concerns about a large amount of foreign capital withdrawing from the Indian stock market, the Indian rupee exchange rate continued to decline, and the Indian rupee fell to a historic low against the US dollar at one point. Traders are currently closely monitoring the 84 level, and analysts predict that once it is breached, the Reserve Bank of India may increase its intervention.
Big sell-off
On October 15th, preliminary data released by the National Stock Exchange of India showed that foreign investors sold a net of 37.316 billion Indian rupees (approximately 3.15 billion yuan) worth of stocks on October 14th, marking the 11th consecutive day of net sales. Domestic institutional investors bought a net of 22.781 billion Indian rupees worth of stocks.
Chinese journalists from securities firms have reviewed previous data and found that from October 1st to 14th this year, foreign institutional investors sold a total of 621.26 billion Indian rupees (approximately 52 billion yuan) worth of Indian stocks. On October 3rd, global funds sold $1.85 billion worth of Indian stocks, setting a record high.
Reflected at the market level, major Indian stock indices such as Sensex30 and Nifty 50 have continued to decline recently, with India's Sensex30 experiencing a cumulative decline of 2.76% over the past month.
It is worth mentioning that domestic institutional investors in India have continued to buy against the trend, purchasing a total of 600.7 billion Indian rupees worth of stocks from October 1st to 14th. Analysts point out that many funds, especially life insurance companies (LIC), tend to adopt a contrarian buying approach and buy when other funds sell.
Analysts say that due to the massive buying by domestic investors in India, the impact of foreign capital selling on the Indian stock market has eased.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "The large-scale foreign sell-off has not had a serious impact on the market, as all foreign sell-off has been absorbed by domestic investors and domestic investors are receiving sustained capital inflows." He expects that the trend of foreign sell-off may continue in the short term.
Analysts have pointed out that the current trend of foreign capital selling is influenced by a shift in investment strategy, which favors the Chinese market over Indian stocks.
With significant changes in foreign investment behavior in the Indian stock market, the market is closely monitoring the data for the next few weeks and its impact on the stability and growth prospects of the Indian market. Analysis suggests that geopolitical developments and future global interest rate trends will be key factors determining the flow of foreign investment in the Indian stock market.
In the past period, the Indian stock market has attracted a large influx of foreign capital. Once the investment trend of foreign capital in the Indian stock market changes, there will be a significant potential for selling.
Citibank believes that the current valuation of the Indian stock market is relatively high, and the profitability of Indian companies is poor, reaching the stage of profit taking. Foreign funds are accelerating their withdrawal from the Indian stock market.
Exchange rate crash
Due to concerns about a large amount of foreign capital withdrawing from the Indian stock market, the Indian rupee exchange rate continued to decline, and the Indian rupee fell to a historic low against the US dollar at one point.
On October 14th, the exchange rate of the US dollar against the Indian rupee rose to a record high of 84.205.
Analysts point out that there are two main reasons for the depreciation of the Indian rupee: firstly, large-scale withdrawal of foreign investment from the Indian stock and bond markets; Secondly, the market expects that the Reserve Bank of India (RBI) may soon cut interest rates, and the policy stance of the Reserve Bank of India (RBI) has shifted from a hawkish stance of "withdrawing loose policies" to a "neutral" stance, prompting the market to increase its bets on the country's interest rate cuts.
This year, the Indian rupee has continued to depreciate and hit historical lows, but due to the Indian central bank's focus on maintaining currency stability, the range of fluctuations is limited. Traders are currently closely monitoring the 84 level, and analysts predict that once it is breached, the Reserve Bank of India may increase its intervention.
Kunal Sodhani, Vice President of Shinhan Bank, stated that despite the intervention of the Reserve Bank of India at the 83.98 and 83.99 levels, capital outflows have been very strong, especially in the stock market. Once the rupee falls below the 84 level, it will become important to observe the intervention methods of the Reserve Bank of India.
Michael Wan, Senior Monetary Analyst at MUFG Bank, stated that from the perspective of RBI, as long as exchange rate fluctuations are not too drastic, the Reserve Bank of India can maintain a certain level of foreign exchange competitiveness.
The Reserve Bank of India reported that as of October 4th, India's foreign exchange reserves decreased by $3.709 billion to $7011.76 billion.
Amit Pabari, Managing Director of CR Forex, a foreign exchange consulting firm, stated that the Reserve Bank of India's defense of the currency and measures that may alleviate stock capital outflows may bring some relief to the depreciation of the rupee exchange rate.
The external pressure for the depreciation of the Indian rupee exchange rate comes from the strong counterattack of the US dollar.
On October 14th local time, the US dollar continued its upward trend from last week, with the Intercontinental Exchange DXY US dollar index rising 0.3%, wiping out about two months of decline; The Wall Street Journal's US dollar index rose 0.4% and also rose to the level of August this year.
On the news front, the current market is betting that the Federal Reserve will maintain a gradual pace of interest rate cuts, supporting the strength of the US dollar. One of the most influential senior officials of the Federal Reserve, Governor Christopher Waller, stated in his latest speech that the Fed needs to be "more cautious" in future interest rate cuts. Waller hinted that future interest rate cuts will be smaller than the significant rate cut in September. This statement further increases the probability of the Federal Reserve cutting interest rates by 25 basis points in November.