Foreign portfolio investors continued to offload shares in the Indian stock market on Monday, Feb. 2, a day after equities logged the worst budget session in six years. Finance Minister Nirmala Sitharaman unveiled Budget 206-27 on Sunday, Feb. 1 and hiked the securities transaction tax (STT) on stock options and futures. FPIs offloaded shares worth Rs 1,859.72 crore on a net basis, according to provisional data on the National Stock Exchange Ltd.
On the other hand, the domestic institutional investors (DIIs) net purchased shares worth Rs 1,764 crore. The support from DIIs last year allowed the markets to remain resilient in the face of FPI exodus. Foreign investors have historically remained guarded in January, having withdrawn funds in eight out of the past ten years, according to experts. FPIs remained in a selling mode in January, withdrawing nearly Rs 36,000 crore as global uncertainties persisted.
ALSO READ: Income Tax Act 2025 to Replace 1961 Law from April 1, 2026: Biggest Overhaul in Six Decades
The recent flight of foreign capital followed the worst outflow of Rs 1.66 lakh crore recorded in 2025, triggered by volatile currency movements, global trade tensions and concerns over potential US tariffs and stretched market valuations. Going ahead, the sharp increase in STT on futures and options is likely to act as a marginal negative for FPI flows in the near term, particularly for high-frequency and derivative-focused global funds, said Aakash Shah, Technical Research Analyst at Choice Equity Broking.
“While the STT hike may help boost tax collections, it risks dampening trading volumes and could slow tactical FPI participation. To meaningfully revive sustained FPI inflows, investors will be looking more closely at macro stability, the rupee movement, and consistency in tax policy rather than just growth optics,” he added. FM Sitharaman announced a proposal to raise the STT on futures to 0.05% from the present 0.02% and STT on options premium and exercise of options to 0.15% from the present rate of 0.1% and 0.125%, respectively.
ALSO READ: Nifty Ends Near 25,100, Sensex Rises Over 900 Points; RIL, L&T Lead Gains
According to data from NSDL, FPIs pulled out Rs 35,962 crore from Indian equities in January. This continued selling pressure by FPIs reflects a combination of global and domestic drivers impacting foreign investor sentiment. According to experts, the key reasons for the FPI sell-off include US tariff threats on Europe amid the Greenland dispute, which sparked global risk-off sentiment, alongside a stronger US dollar, elevated bond yields, rupee weakness to Rs 90-92 levels, and stretched valuations.
Comprehensive Budget 2026 coverage,
LIVE TV analysis,
Stock Market and
Industry reactions,
Income Tax changes and
Latest News on NDTV Profit.
