FPIs extend selling streak to 12th straight session, January outflows top ₹50,000 crore | Stock Market News

Indian Stock Market: It seems that overseas investors are unwilling to reverse their selling streak in Indian markets, as the outflow of funds that began in 2024 has continued into the new year without any signs of slowing down. In the previous trading session, FPIs offloaded equities worth ₹4,336 crore, marking their 12th consecutive trading session as net sellers.

So far in January, except on January 2, FPIs have remained net sellers, offloading nearly ₹50,912 crore worth of Indian stocks through exchanges, according to Trendlyne data.

The relentless selling by FPIs is evident in the performance of Indian markets. Both frontline indices, Nifty 50 and Sensex, have declined by nearly 2.5% each in January to date. Broader markets have fared even worse, with the Nifty Midcap 100 and Nifty Smallcap 100 indices correcting by up to 7% during the same period.

In addition to global factors, local uncertainties—such as weakness in Q3FY25 earnings estimates and a slowdown in the Indian economy—are weighing on FPI sentiment. Analysts have cautioned that Q3FY25 could be another subdued quarter for India Inc., fueling concerns that EPS downgrades, which were prevalent in H1FY25, will continue this quarter.

Furthermore, despite the sharp decline in Indian markets, most analysts are maintaining a cautious stance, citing that valuations in many segments of the market remain elevated.

Trump factor could influence FPI outlook

As proposed during his election campaign, President Donald Trump, just hours after his inauguration, announced that he is likely to consider imposing a 25% tariff on Canada and Mexico as early as February 1, citing concerns over illegal immigration at the US border.

Trump also mentioned China but provided no further details. The US dollar reacted strongly to this development, rebounding in today’s trade from Monday’s slump and currently trading above 108.5.

According to recent media reports, he also threatened 100% tariff hikes on BRICS nations, including India, stating that member countries would face 100% tariffs if they continued their de-dollarization efforts. In recent years, central banks started diversifying their forex reserves away from the dollar by accumulating large quantities of gold.

Trump’s economic policies are centered around enhancing the global competitiveness of American businesses. During his first term, he imposed tariffs on major trading partners, with China—a key trading partner of the USA—being a primary target.

There are also concerns that his proposed tariff plan could reignite inflation, potentially complicating the US Federal Reserve’s plans for rate cuts in 2025. In their December meeting, Federal Reserve officials expressed concerns about the inflationary impact of Trump’s policies.

Amid these developments, experts believe that selling pressure from FPIs could persist in the near term. 

Economic growth, corporate earnings recovery could boost inflows 

According to market experts, a potential turnaround in FPI sentiment would be shaped by cyclical improvements in Indian corporate earnings, coupled with stronger GDP growth driven by resilient domestic consumption and increased government spending on infrastructure projects. 

Additionally, analysts noted that the Reserve Bank of India’s potential interest rate cuts may create a more favourable borrowing environment. This, in turn, could make US bonds less attractive and further encourage FPI inflows.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.