Foreign Portfolio Investors (FPIs), who remained net sellers in the domestic equity markets during the first fortnight of fiscal 2025-26, offloaded the highest amount of shares of information technology (IT) companies, followed by financial services stocks and capital goods in the same period.
Overseas investors net sold Rs 33,927 crore of local shares between April 1 and 15. In the first fortnight of the current fiscal, FPIs net sold Rs 13,828 crore worth of IT shares and Rs 4,501 crore worth of financial services stocks. This sell-off was driven by uncertainties stemming from reciprocal tariffs announced by US President Donald Trump on April 2, and the following escalation in trade wars.
Analysts, however, believe that the FPI trend is likely to reverse in favour of emerging markets, especially India, in the near term, amid trade tensions between the US and China.
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“The bulk of the (FPI) selling was between April 1 and 7 and was primarily due to the concerns about reciprocal tariffs from the US, and thus the Indian currency declined sharply to 86.75 level, which is back to 85.40 in the last two days,” said Shrikant Chouhan, Head Equity Research, Kotak Securities.
Heavy selling by FPIs resulted in the Sensex and Nifty plunging close to 4 per cent between April 1 and 7. However, both the indices have now recovered their losses.
Besides, IT and financial services stocks, FPIs pulled out money from capital goods (Rs 3,019 crore) metals & mining stocks (Rs 2,829 crore), oil gas & consumable fuels (Rs 2,759 crore), and automobile and auto components (Rs 2,562 crore) between April 1 and 15.
“Although services were not targeted (through reciprocal tariffs), Indian IT companies were spooked by the prospect of slowdown in the US and therefore cut in IT budgets. The fear of slowdown in India triggered concerns of capital spending hitting the financial sector which already had multiple headwinds. Overall the selloff was in line with global sentiments, hence FPIs reduced risk,” said Vineet Sachdeva, Entrepreneur Partner-Quantitative Equity Investing, Alpha Alternatives.
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Recently, the US imposed a 245 per cent tariff on various Chinese imports. The trade war between the US and China escalated after the US President slapped a 145 per cent tariff on import of Chinese goods. In retaliation, China had announced to levy a 125 per cent tariff on imports from America.
FPI flows likely to reverse
According to VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, the fortnightly FPI investment data in the current global uncertainties may not give a clear picture. In the last two days, there has been areversal in FPI flows into India, with overseas investors purchasingRs10,824.29 crore worth of domestic stocks.
“Following Trump’s tariff announcement, there is a very high probability of the US dipping into a recession, or in the best case scenario, the growth rate is projected at less than 1 percentage in 2025. Also, the prediction of GDP growth for China is around 3.5 per cent only for 2025,” Vijayakumar said.
“In this context, the earnings growth from these two countries will also be impacted. So that is the reason why FPI flows have suddenly reversed. There is a clear and distinct pivot in favour of emerging markets, particularly India,” he said.
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In the last few days, the dollar index has slipped below 100. With the dollar depreciating, analysts see money flowing out of the US and into emerging markets, particularly India.
