The relentless selling by foreign portfolio investors (FPIs) has made stock market investors jittery. Data showed FPIs have sold domestic stocks for seven straight sessions now, with total outflows standing at Rs 97,104 crore, near the Rs 1 lakh crore mark, in 2025 so far. Dedicated funds are selling domestic shares in the fresh round. China, on the other hand, has started attracting foreign inflows.
Elara Securities said India flows continue to remain under pressure for the fifth month with more redemptions of $405 million this week. Out of these outflows, $238 million were from Dedicated funds, it noted
While India redemptions from US funds have halted for the first time since October 2024, the pressure is emerging from other regions viz. Ireland (down $103 million), Luxemburg (down $88 million) and Japan (down $46 million).
"UK funds are also pulling out gradually since November 24 with total outflow of $435 million. US fund flow into India is mostly through ETFs. However, flows from other regions are mostly in active funds. As outflows from other regions accelerate, we see bigger stock level corrections," Elara noted.
Against this, foreign fund flow into China is improving since the past two weeks. This week’s inflow of $573 million is the largest since October 2024. Global fund manager actions are showing a gradual shift towards China from India, the brokerage noted.
The FPI outflow trend has been observed amid a persistent drop in rupee against the dollar. The local currency stood at 86.85 against dollar on Friday. A rise in US 10-year treasury yield and weaking of rupee made returns from domestic equities look unattractive. This is especially at a time India Inc has reported muted results for the second straight quarter, leading to earnings downgrades.
"A sustained domestic market rally is unlikely since the FIIs continue to be on sell mode. Only a decline in dollar and US bond yields will turn the FIIs into buyers," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Data available with depository NSDL suggests FPIs have sold Rs 19,077 worth (primary and secondary market) stocks in February after selling shares worth Rs 7,8027 crore in January. They were net buyers of domestic equities to the tune of mere Rs 427 crore in calendar 2024.
Prashanth Tapse, Senior VP (Research), Mehta Equities said: "As FIIs continued to maintain their sell stand, the market is beginning to get more volatile with investors booking profit in select frontliners."