Indian stock market today: Overseas investors remained net sellers for the fifth consecutive session on Friday, July 25, pulling out another ₹1,980 crore from the Indian stock market. This took their cumulative five-day selling to ₹13,551 crore and pushed their total monthly outflows to ₹30,562 crore so far.
After three months of sustained buying, overseas investors resumed their selling spree in July amid a lack of clarity surrounding the India–US trade deal, stretched valuations, and a tepid start to the June quarter earnings, prompting them to stay away from local equities and look instead at other Asian markets where valuations appear more attractive compared to India.
In addition, the strengthening US dollar and elevated US bond yields are adding to the pressure on Indian equities. The US benchmark has surged 28% from its April lows as investors grew optimistic that President Donald Trump’s tariff war won’t hurt the economy and corporate earnings as initially feared.
Meanwhile, the latest strong jobs data weakened expectations for imminent cuts by the Fed ahead of the central bank’s meeting next week and is also supporting a strong US dollar.
DIIs shield market from FPI selling pressure
FPIs have been net sellers in 12 out of 19 trading sessions in July. However, the impact on Indian stock market has been limited, thanks to robust buying from domestic institutional investors (DIIs), largely driven by mutual funds, who have continued to absorb the heavy FPI selling.
According to exchange data, DIIs have purchased ₹37,687 crore worth of Indian equities in July so far, more than offsetting the FPI outflows. DIIs have remained net buyers since August 2023, and their total investments are on track to cross the ₹4 lakh crore mark in just seven months of 2025.
Trade deal, earnings recovery seen as crucial triggers for FPI sentiment
Despite starting 2025 on a negative note, with FPIs remaining net sellers for the first three months, sentiment reversed in April and stayed positive in the following two months. During this period, FPIs cumulatively purchased over ₹31,000 crore worth of equities, helping frontline indices touch new near-term highs.
However, the sharp rally in the Indian stock market has once again raised valuation concerns. A weak start to the June quarter earnings season, particularly in the IT sector and select banking names, has further fueled expectations of a subdued quarter for India Inc.
So far, only half of the 12 Nifty companies that have reported first-quarter results have managed to beat analyst estimates, according to Bloomberg. This is significantly lower than the previous quarter, when over 58% had surpassed expectations at the same point in the results season.
Analysts believe that a turnaround in FPI sentiment hinges on improved earnings visibility and clarity on the India–US trade deal. A favorable resolution, they say, could bolster the outlook for export-oriented sectors and enhance India’s relative appeal among emerging markets.
Meanwhile, the continued moderation in inflation has strengthened expectations of a potential rate cut. If realized, this could further support market sentiment.
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.
