MUMBAI: Foreign institutional investors (FIIs) continued to sell in the Indian stock market, offloading equities worth Rs 81,903 crore in Jan. The trend persisted in Feb, with Rs 30,588 crore sold till the 21st, bringing total FII outflows in 2025 to Rs 1.1 lakh crore, according to NSDL.
This has led to a 4% decline in Nifty year-to-date.
Indian equities have underperformed Asian peers due to FII outflows, also pressuring the rupee. Investors are tracking key indicators like the US Core PCE Price Index and India’s GDP growth. Brokers said, corporate earnings recovery and improved global liquidity would be the next major triggers.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, said the US market has seen large capital inflows following Trump’s election victory. China has also become a key destination for portfolio investments.
He noted that the Chinese president’s initiatives with business leaders have raised hopes of a growth revival, boosting the Chinese stock market.
“The Hang Seng index, through which FIIs buy Chinese stocks, surged 18.7% in a month, contrasting with Nifty’s 1.6% decline,” he said. Since Chinese equities remain undervalued, he added, the “sell India, buy China” trade may persist but cautioned that “such trades have fizzled out in the past due to structural issues in China’s economic recovery.”
Market liquidity is set to tighten with upcoming IPOs diverting funds from the secondary market. Key IPOs include Reliance Jio (Rs 8 lakh crore), LG Electronics India (Rs 15,000 crore), Ather Energy (Rs 4,500 crore), Zepto (over $1 billion) and JSW Cement (Rs 4,000 crore).
Vikram Kasat, head of advisory at PL Capital – Prabhudas Lilladher, said Sensex has lost 2,300 points this month, with FIIs withdrawing Rs 23,000 crore, triggering a selloff in small- and midcap stocks. Renewed foreign interest in Chinese equities and India’s premium valuations remain concerns.
India’s long-term growth prospects remain strong, but near-term valuation concerns and weak corporate earnings have led to profit booking. India’s premium valuations over emerging markets are prompting global investors to reassess their positions.
India’s premium valuations relative to peers like Indonesia, South Korea, and Taiwan have been a headwind. A consolidation or earnings-driven growth could reset valuations and attract FIIs. Vaibhav Porwal, co-founder of Dezerv, said India’s market cap has declined by $1 trillion since Oct 2024, while China’s has increased by $2 trillion, indicating a tactical shift in FII flows. “NSDL data shows FPIs pulled out around Rs 25,000 crore from Indian equities in Jan 2024, contrasting with inflows of over Rs 1.7 lakh crore in 2023,” he said.
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