Emkay expects FII selling to ease from April, sees Nifty hitting 25,000-mark by December; check top investment ideas

The smallcap index slipped into the bear territory amid a 21.2 percent crash from record highs.

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26 Aug, 2025 12:21

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Foreign institutional investor (FII) selling in the Indian stock market is likely to slow down from April 2025, according to Emkay Institutional Equities. The brokerage expects valuations to stabilise, aided by a peak in the U.S. Dollar Index (DXY) and improving earnings visibility.

So far in 2025, FIIs have been net sellers of equities worth Rs 1,06,445 crore, amid concerns over weak corporate earnings, expensive valuations in the broader market and a strong dollar weighing on the rupee. However, foreign investors turned buyers on Tuesday, picking up shares worth Rs 4,786.56 crore.

"Despite sustained selling pressure, we expect foreign portfolio investor (FPI) activity to stabilise post the first quarter of the calendar year 2025, as earnings forecasts bottom out and valuations turn reasonable. A peak in DXY should also help ease rupee depreciation concerns and support FPI inflows. Additionally, the Reserve Bank of India’s (RBI) liquidity measures could boost domestic equities, particularly benefiting the BFSI sector," Emkay Institutional Equities said in a note.

Emkay Institutional Equities highlighted key investment picks across segments:

Large-cap stocks: Lupin, Zomato, Tata Motors, IndusInd Bank

Mid-cap stocks: Escorts, Paytm, Metropolis

Small-cap stocks: Stovekraft, Quess Corp

Nirav Sheth, CEO – Institutional Equities at Emkay, said the worst of the earnings downgrade cycle may be over, with a recovery expected in the latter half of the financial year. "Renewed government spending and tax relief-led consumption should aid growth. It is time to buy," he stated.

The brokerage has set a Nifty target of 25,000 by December 2025, citing a gradual recovery in consumption, improving employment trends, a revival in unsecured lending and increased welfare spending.