FIIs Continue Selling Indian Equities, Offload Rs 9,100 Crore in February
Foreign Institutional Investors (FIIs) have maintained their selling pressure in the Indian equity market, with net outflows of Rs 9,090 crore in the cash segment this month up to February 7, according to market data.
Persistent Selling Trend
Despite investing Rs 1,478 crore through primary market issuances, the overall trend indicates a strong inclination towards selling. For the calendar year 2025, FIIs have divested a significant amount of Rs 90,993 crore from Indian equities.
Reasons Behind the Outflow
The substantial sell-off can be largely attributed to the strength of the dollar index and elevated US bond yields. These factors have made it more attractive for FIIs to shift capital away from emerging markets such as India.
According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “The strength in the dollar index and the high US bond yields continue to force the FIIs to sell. Going forward, FIIs are likely to reduce their selling since the dollar index and US bond yields are indicating a softening trend.”
Improving Domestic Sentiment
Market sentiment within India is gradually improving, fueled by a positive response to the Union Budget and the recent rate cut by the Monetary Policy Committee. The BJP's victory in the Delhi elections is also expected to contribute to increased market confidence in the short term.
Future Market Direction
The medium-to-long term trajectory of the market will depend on a sustained recovery in GDP growth and corporate earnings, as stated by Viajayakumar.
India's Resilience
Despite global concerns such as potential tariffs and trade restrictions from the US government, rising inflation risks, currency depreciation, and trade wars, India appears to be well-positioned. Strong measures and timely rate cuts by the RBI are aimed at boosting domestic investments and consumption, thereby maintaining market buoyancy.
Manoj Purohit, Partner & Leader, FS Tax, Tax & Regulatory Services at BDO India, noted that the government has laid the roadmap for a ‘Viksit Bharat’ vision through sound reforms in the financial services sector, enhancing foreign participation. While FPI inflows have not yet fully turned positive, the announcements in the Budget and the Central Bank’s policy release have put India back in the forefront as one of the fastest-emerging economies.
Government Initiatives to Attract Foreign Investment
The government has echoed these sentiments by simplifying the tax regime, clarifying tax anomalies, and extending tax holidays in IFSC Gift City by another 5 years, making the Indian market more appealing to foreign investors.
The decision to invite 100% FDI in insurance is another step that is expected to deepen the insurance market, promote competition, and encourage the adoption of global best practices.
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