The rekindling of global trade tensions, stretched valuations and concerns over another weak performance by corporate India in the June quarter appear to have dented overseas investor sentiment, as they remained net sellers in six out of nine trading sessions in July, pulling out nearly ₹555 crore from the Indian stock market.
Despite starting 2025 on a negative note, remaining net sellers for the first three months, sentiment reversed in April and stayed positive in the following two months, with FPIs buying over ₹31,000 crore worth of equities, which helped frontline indices reach new near-term highs.
However, the sharp rally in the Indian stock market has once again brought valuation concerns to the forefront. With analysts projecting another weak earnings season for Nifty 50 companies in Q1FY26, FPIs appear to be redirecting their focus to other Asian markets, where valuations are relatively more attractive compared to India.
In June, FPIs have poured ₹7,488 crore, and in May and April, they bought ₹19,686 crore and ₹4,223 crore worth of Indian stocks through exchanges, respectively. Though FPIs remained net buyers between April and June, the aggressive selling during the first quarter of 2025 more than offset the recent inflows, keeping their overall stance negative for the year so far.
Total outflows now stand at over ₹1 lakh crore. They had withdrawn ₹3,973 crore in March, ₹34,574 crore in February, and a substantial ₹78,027 crore in January.
FPIs sell in secondary market but stay active in primary market
“There are signs of FPI inflows weakening. After three months of positive inflows, FPI has turned negative, though marginally, so far in July. FPI inflows into equity through stock exchanges in July, up to the 11th show a negative figure of ₹555 crores. This is the first negative inflow number after three months of positive inflows in April, May, and June,” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
He added that while FPIs were net sellers in the first three months of 2025, this trend reversed in the second quarter. However, for the calendar year so far, inflows still reflect a negative figure of ₹1,00,443 crore due to heavy selling in January and February.
“FPI selling in July, after three months of buying, can be attributed to the recovery in the market from the March lows and the resulting elevated valuations. Since other markets are relatively cheaper, FPIs may again rotate funds to those geographies as a short-term strategy,” he explained.
An important observation, according to Vijayakumar, is that FPIs have continued to invest consistently in the primary market even during periods of exchange-based selling. He also pointed out that the Indian market underperformed most others, including the MSCI Emerging Markets index, in the first half of 2025.
Weakness in the Nifty 50 is likely to persist in the near term
Nifty has been exhibiting a weak trend, primarily weighed down by the performance of IT stocks. According to Vijay Kumar, this weakness may persist, especially since FIIs were significant sellers in the cash market last Friday. However, he noted that banking and financial stocks are outperforming even in this weak market—a trend he expects to continue.”
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.
