Foreign equity outflows in the first two months of 2025 hit Rs 1,13,721 crore level, with the average daily FPI selling now standing in the north of Rs 2,700 crore, as the Trump era triggered a risk off trade globally. Trump took oath as the US President for the second time on January 20. Fears of tariff war followed.
In the 42 sessions so far, excluding Friday's, the average daily FPI outflows stands at Rs 2,708 crore and there is still ample scope for this selloff to continue.
This is because FPIs held $929 billion worth domestic shares at last count. This was against $565 billion worth Korean shares they owned and $377 billion worth China A shares they held, as per latest holding patterns.
In percentage terms, they held 16 per cent stake in Indian equities against just 4 per cent for China A, 17 per cent for Thailand equities and 15.6 per cent for Philippines stocks. FPI ownership in Korea (34.6 per cent) and Indonesia (27.1 per cent) is comparably high.
"The first 30 days of Trump 2.0 have been a high-octane one. The President has signed a record 70 executive orders in his first 30 days in the office–outpacing his predecessors and his first term by a mile. The measures have been wide-ranging: withdrawal from Paris climate accord, souring relations with its long-standing western allies, imposing higher tariffs on its largest trading partners (Mexico/Canada) than China, cuts on Federal government spending and international aid," Nuvama said.
One is at a loss for precedence, the brokerage said adding that this has heightened policy uncertainty.
The month of February marked a losing streak of five straight months, the first since 1996. Yet, valuations still appear rich. "March is likely to witness recovery in the Indian market backed by better macro news flows and subdued FII selling. Since largecap valuations are fair, and in pockets attractive, FIIs are unlikely to press selling as aggressively as the last few months," said V K Vijayakumar of Geojit Financial Services.
Vijayakumar said long-term investors can utilise the weakness in the market to slowly accumulate fairly-valued quality largecaps and select fairly-valued stocks in the broader market.
PL Capital is also hopeful. "The biggest concern of the market – the FPI flows may turn positive on the back of higher capex, tax cuts & consumer demand revival. Lastly, the Nifty’s 12-month target is seen at 25,689," it said.
"India is witnessing major FII selling among peer nations and so we remain cautious, preferring large-caps and value investing vs. growth stocks," InCred Equities.