Indian stock market: Following the escalation in trade worries after Trump’s 100% pharma tariff, the key benchmark indices of the Indian stock market ended lower for the seventh straight session on Friday last week. The Nifty 50 index moved from 25,423 to 24,654 in these seven successive sessions, logging over 750 points or around 3% dip in this sharp selling. Despite strong support from the DIIs’ buying, FIIs remained net sellers by selling Indian stocks worth ₹30,141.68 crore in the cash segment this month. As just two more sessions are left in September 2025, FIIs are expected to remain net sellers in the cash segment for the third straight month. They have sold Indian shares in cash worth ₹47,666.68 crore and ₹46,902.92 crore, respectively, in July and August this year.
According to stock market experts, escalation in trade war after imposition of 25% Trump’s tariffs on India, which was followed by an additional 25% tariff for crude oil imports from Russia and H-1B visa fee being increased to $1,00,000 for fresh applicants, FIIs are finding no reason to pause selling in the Indian stock market. However, they said that falling Indian National Rupee (INR) against the US Dollar (USD) is also a significant reason for FIIs’ continued selling of Dalal Street-listed stocks. They said the stronger US Dollar against the Indian Rupee will eat up the FIIs’ returns from the Indian stock market.
Top reasons for FIIs’ record outflow
Highlighting the top reasons that have fuled record FIIs’ outflow from the Indian stock market, Khushi Mistry, Research Analyst at Bonanza, said, “Foreign Institutional Investors (FIIs) and Foreign Institutional Investors (FIIs) are selling Indian equities due to a combination of Trump administration policy shifts (notably the H-1B visa fee hike and new tariffs), high market valuations, weak corporate earnings, rupee depreciation, and global risk aversion. IT and export-driven segments (textile, jewellery, chemicals) face the sharpest pressure due to direct policy risk and tariff effects. The broader market, including mid and small-caps, has suffered due to liquidity drying up and weak earnings. These factors have collectively driven record FII outflows, pulling down benchmark indices and raising volatility across Indian markets.”
Sell India! Buy China, South Korea
Highlighting other factors fueling FIIs’ outflow from the Indian markets, Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, said, “A key challenge is subdued earnings growth. India Inc. has delivered high single-digit growth, failing to meet expectations needed to justify inflated valuations. The Nifty trades at a PE ratio near 22, above historical averages, making India relatively expensive. FIIs are shifting capital to cheaper markets such as China and South Korea, offering better risk-reward.”
Trump’s tariffs on India
“India’s trade ties with the US have also deteriorated. Tariffs on select goods have increased to 50%, with a fresh announcement imposing 100% tariffs on branded pharmaceuticals likely to further dissuade FIIs by adding to existing economic uncertainty,” Sachin Jasuja added.
H-1B visa fee hike
Jasuja said that a sharp rise in H-1B visa fees now pressures the export-oriented IT sector, signalling the US intends to use all levers—including tariffs and visa restrictions—to influence India, especially over Russian oil imports. Rising costs and uncertainty are prompting IT firms to rethink delivery and staffing models. Combined with geopolitical tensions, these factors increase investor caution.
Falling INR vs USD
On how the falling Indian Rupee has dented FIIs’ sentiments about the Indian stock market, Jasuja said, “Currency depreciation adds pressure as the rupee falls to record lows against the dollar, eroding foreign investor returns, and as a result, domestic institutional ownership has risen. These factors drive FIIs’ selling, reshaping India’s equity ownership landscape.”
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