Sewing a seem

I am finishing a tote bag that will be felted. The instructions say "with tapestry needle and 1 strand of wool, sew the bottom seam with a loose overcast stitch"
My question is, should the bag be right side out or inside out?

In theory, it should be wrong side out, the way you’d seam up a garment. In practice, since you’ll probably mattress stitch it and it’s going to felt, you won’t see much of the seam anyway. I’d still sew it with the wrong side out, though.

You do most seams in knitting on the outside. It may look okay to do the loose overcast stitch on the outside as well. Try a litle and if it doesn’t look good try it on the inside.