Foreign Institutional Investors (FIIs) continued their exodus from Indian equities, offloading Rs 10,179 crore so far in February 2025, rattled by weak Q3 earnings and escalating global trade tensions as the US slaps tariffs on Canada, Mexico, and China. January had already seen a massive Rs 87,374 crore selloff.
Markets remained under pressure for the third straight session on February 7, with the Sensex shedding 198 points, or 0.3 percent, to close at 77,860, while the Nifty slipped 43 points, or 0.2 percent, to 23,559. Both indices are currently down around 10 percent from their record highs of September 27, 2024.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, expects FPI flows to remain turbulent. "The Q3FY25 earnings season has been broadly in line with our tepid expectations, while management commentary continued to remain uninspiring on aggregate. Markets also coped with the volatility induced by frequent shifts in policy of the US government regarding tariffs. Sectoral movements were dictated by a mix of macro headlines as well as the impact of Q3FY25 results and commentary."
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He pointed out that FPI flows were negative across major emerging markets, barring the Philippines and Thailand. India, Brazil, Indonesia, Malaysia, South Korea, Taiwan, and Vietnam saw outflows of US$430 million, $106 million, $202 million, $59 million, $41 million, $1,422 million, and $125 million, respectively, while the Philippines and Thailand witnessed inflows of $21 million and $43 million.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed the relentless FII selling to the strong dollar index and elevated US bond yields.
However, he expects FIIs to reduce the pace of selling going forward. "Going forward, FIIs are likely to reduce their selling since the dollar index and US bond yields are indicating a softening trend."
He noted that market sentiment is gradually improving, buoyed by the Budget 2025 and the MPC’s 25 basis point rate cut. "The victory of the BJP in the Delhi elections is a major achievement for the ruling dispensation. This is likely to positively impact the market in the short run. However, the medium to long-term trend in the market will depend on the recovery in GDP growth and earnings recovery."
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