FII flows reflect global opportunity cycles, not single trade events: SEBI Chairman

FII flows reflect global opportunity cycles, not single trade events: SEBI Chairman

• FII flows are driven by global capital cycles, not single events
• Foreign investors move based on changing risk-reward factors.
• FII activity in Indian markets stays strong despite outflows

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With markets continuing to face uncertainty around the US trade policy, the Securities and Exchange Board of India (SEBI) chairman, Tuhin Kanta Pandey, shared his perspective on how to assess Foreign Institutional Investor (FII) behavior led by this volatility. While addressing a question at the latest PMS Conclave held in collaboration with NISM and APMI, he said that FIIs' behaviour should be interpreted through the broader prism of global capital allocation cycles rather than pinned to any single event like tariff announcements.

“FIIs react to different global developments, global opportunities and global relative tax returns in dollar terms across different jurisdictions,” Pandey said.

He added that portfolio flows are inherently dynamic, with foreign investors retaining full flexibility to enter and exit markets depending on shifting risk-reward considerations. “They’re basically an in-and-out story and they’re free to exit and free to enter at any point of time and they look at opportunity,” he further said.

Pandey pushed back against the view that recent tariff announcements alone were driving capital movement. “So, it’s not really specifically this 15% is triggering this,” he said, noting that such narratives often oversimplify complex global allocation decisions.

Pandey also pointed out that foreign participation in Indian markets has remained active across segments despite periodic net outflows. “FIIs have been there for quite some time and in between they are also coming in primary markets, they are there in secondary markets and outflows,” he said.

The Chairman's comments come amid heightened market sensitivity to global trade negotiations and cross-border capital movements. The US Supreme Court recently struck down President Trump's broader "sweeping" tariffs, only for a temporary 10% global import surcharge (later hiked to 15% under Section 122 of the Trade Act) to take effect from late February 2026. Markets initially reacted with uncertainty, contributing to intermittent FII outflows in early-to-mid February. Yet, flows have shown fluidity, turning positive by late February.