Foreign Portfolio Investors (FPI) continued their selling of Indian equities this past week, with net outflows amounting to ₹7,342 crore. This marked the ninth consecutive week of FPIs being net sellers, according to depositories data.
However, market experts believe that FPIs may ease their selling spree in the upcoming week following the BJP’s decisive victory in the Delhi Assembly elections. The equity markets are expected to react positively to this development on Monday. Additionally, the weakening dollar index and US bond yields suggest a softer trend, which could further support the market.
The recent budget announcements, such as the boost to consumption through the ₹12 lakh income tax exemption threshold, along with the RBI’s repo rate cut, have already been contributing to positive market sentiments. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the significance of BJP’s win in Delhi, stating that it is likely to have a short-term positive impact on the market.
Looking ahead, the medium to long-term trend in the market will be influenced by the recovery in GDP growth and earnings. Despite the ongoing FPI selling pressure driven by the strength in the dollar index and US bond yields, Vijayakumar expects FPIs to reduce their selling as these indicators show signs of softening.
Since the beginning of the calendar year until February 7, FPIs have sold equities worth ₹85,369 crore. Manoj Purohit, Partner & Leader at BDO India, noted that while FPI inflows have not completely turned positive, measures taken by the government in the recent Budget have positioned India as the fastest-growing economy among emerging markets.
Purohit emphasized that India remains well-prepared to face global economic challenges, attracting foreign investors looking for long-term returns. The recent announcement of allowing 100 percent FDI in insurance is expected to further deepen the insurance market in India.
Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, highlighted the factors contributing to the sustained outflow of foreign investments from Indian equities. Global trade tensions, RBI’s rate cut, concerns over GDP growth, weak corporate earnings, and the sharp depreciation of the Indian rupee have all played a role in shaping investor sentiment.
In contrast to the equity outflows, FPIs have shown interest in Indian debt, with an inflow of around ₹17,000 crore in the debt market until February 7. Looking ahead, market sentiment is likely to be influenced by global macroeconomic developments, domestic policy measures, and currency movements.
