As per depositories data, FPIs took out Rs 13,550 crore from equities but invested Rs 1,272 crore in the debt segment during October 1-29.
The total net outflow stood at Rs 12,278 crore during the period under review.
FPIs were net buyers in August and September.
“Foreign brokerages like Merril Lynch, UBS and Nomura have downgraded India due to excessive valuations. This might have prompted FPIs to sell on a sustained basis,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.
FPIs have been sellers in software during the first half of October. This is profit-booking since they are sitting on big profits.
However, they have been buyers in banks and autos where there is valuation comfort, he added.
Three IPOs are expected to raise Rs 30,000 crore from the market in the next few days that are expected to get heavily oversubscribed and, therefore, there will be a huge drain of money from the secondary to the primary market.
“This is another factor prompting FPIs to sell. Due to big FPI selling, markets have turned distinctly weak,” he said.
FPI flows in other emerging markets in October was mixed, said Shrikant Chouhan, head (equity research-retail) at Kotak Securities.
Indonesia, Philippines and Thailand reported FPI inflows of $951 million, $8 million, and $564 million, respectively.
On the other hand, Taiwan and South Korea reported FPI outflows of $2,633 million and $2,801 million, respectively, Chouhan said.
With respect to future of FPI flows, he said flows are expected to remain volatile in the emerging markets.
“On the economy front, RBI minutes reflected the members’ rising concerns on global inflationary pressures and economic slowdown, especially in some advanced economies, which some members highlighted, could have spill-over effects on India,” Chouhan said.