Foreign Investors Pull Out Record ₹21,105 Crore In A Day, MSCI Rejig & Global Factors Trigger Massive Selloff

Mumbai: Foreign institutional investors (FIIs) sold a record Rs 21,105 crore worth of Indian equities on May 29, marking the biggest single-day outflow ever from the domestic stock market. The sharp selling has once again raised concerns over foreign investors reducing their exposure to Indian stocks.

Record One-Day Outflow

The massive selloff came even as the Nifty continues to trade below its average valuation levels of the past five years.

Market experts said the outflow was not entirely due to regular FII selling. A large part of the selling was linked to the latest MSCI index rebalancing exercise.

According to estimates by Nuvama Alternative, MSCI-related adjustments resulted in outflows of nearly USD 1 billion. However, even after excluding this amount, foreign investors remained heavy sellers in the market.

MSCI Rebalancing Hits Large Stocks

The MSCI Standard Index rebalance led to a reduction in the weightage of several major Indian companies.

Among the stocks expected to witness significant outflows were Bajaj Finance, Tata Consultancy Services (TCS), Infosys, Mahindra & Mahindra and Hindustan Unilever.

Bajaj Finance was estimated to see outflows of around $204 million, while the other companies were expected to face outflows ranging between USD 109 million and nearly USD 200 million.

Similar Selling Seen Earlier

Although Friday's outflow was the biggest on record, Indian markets have witnessed sharp foreign selling on several occasions over the past year.

On Oct 4, FIIs sold more than Rs 15,000 crore worth of equities shortly after the market peaked on Sept 27.

Another selloff of over Rs 12,000 crore was recorded on June 5, following the Lok Sabha election results. Markets also witnessed foreign selling of more than Rs 12,000 crore on March 24 amid rising geopolitical tensions involving the US and Iran and higher crude oil prices.

Valuations Offer Hope

Despite continuous outflows, market valuations have become more attractive.

The Nifty is currently trading at around 18.1 times one-year forward earnings, lower than its five-year average valuation of 20 times.

Analysts believe lower valuations, possible policy reforms and easing geopolitical tensions in West Asia could help attract foreign investors back to Indian markets.

Experts Expect FIIs to Return

Arvind Maheshwari of BofA Securities said the current phase of foreign selling appears cyclical rather than structural.

He expects overseas investors to gradually return to Indian equities, supported by improving global conditions, ongoing reforms and more reasonable market valuations.