FPI flows wobbly after $6 billion buying spree over 16-sessions

markets

Foreign investors turned net sellers on May 9, snapping a 16-session streak of inflows that had poured over $6 billion into Indian equities since April 15. The selling came on a day when geopolitical tensions peaked between India and Pakistan.

From April 15 to May 8, Foreign Institutional Investors (FIIs) were consistent buyers, riding on optimism after former US President Donald Trump announced a 90-day pause on tariffs. But on May 9, FPIs registered net outflows of $281 million —their first withdrawal since the rally began, according to final data from NSDL.

On May 12, when the market rallied 3 percent led by euphoria around ceasefire between Indian and Pakistan, FPIs bought shares worth Rs 1,246 crore on a net basis, but again turned negative on May 13 of Rs 3,798 crore, according to NSE provisional data. The difference between provisional data provided by the exchange and the final data by NSDL is that the latter includes primary market activity and other transactions that do not get captured in the secondary markets.

Since mid-April, the Sensex and Nifty have surged over 10 percent, while BSE MidCap and SmallCap indices have gained around 11 percent. The recent rally has been fuelled by a weaker US Dollar Index (DXY), a temporary easing in global trade tensions, and India’s relative resilience amid global growth concerns.

Siddarth Bhamre, Head of Research at Asit C. Mehta Investment Intermediates, noted that the inflows were modest when compared to earlier outflows during the market correction. “It’s too early to say FIIs are back in a big way. Sustained flows will depend on how the dollar behaves,” he said.

While ceasefire between India and Pakistan have eased nerves, the temporary US-China tariff truce has slightly clouded the urgency around global supply chain diversification—an angle that had favoured India under the “China+1” theme.

Meanwhile, Q4 earnings have underwhelmed. Kotak Institutional Equities reported Nifty 50 earnings up just 4.8 percent YoY, with its broader coverage universe growing 8.2 percent. Gains were led largely by banks and downstream oil marketing companies, while sectors such as consumer, IT, and capital goods grappled with weak volumes, muted demand, and margin pressure.

Valuations are flashing red across the board. Several sectors, including banks and telecom, are trading near full valuations. Mid- and small-cap segments also look stretched, increasing the risk of derating if earnings continue to disappoint.

Still, optimism hasn’t dried up. Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, said the US-China deal helps avert inflationary shocks in the US and could pave the way for the Federal Reserve to resume rate cuts. “This would boost global liquidity, and India—being the fastest-growing major economy—will remain an attractive destination,” he said.

A recent Bernstein report forecasts FY26 earnings growth of 15 percent for NSE 100 companies and 14 percent for NSE 200, even as revenue growth remains modest. For the NSE 200, margins are expected to expand by 126 basis points to 15.5 percent—its highest level since FY22—on the back of stable crude prices and a potentially better demand environment in H2.

Gupta added that while Q4 results were tepid, a 10–12 percent earnings growth projection for FY26 is reasonable. “In the global context, 10 percent growth with a sub-20 P/E is an attractive proposition. Nifty’s historical P/E of 24–25 makes a high-teen multiple look fair, especially if rates start easing,” he said.