Continued Selling by FPIs in March

Foreign Portfolio Investors (FPIs) have continued to offload Indian equities in March, resulting in massive equity outflows amounting to Rs 24,753 crore as of March 7. This aggressive sell-off marks the transfer of Rs 137,354 crore in total outflows for CY25 so far, indicating a clear risk-off sentiment among foreign investors.

A Silver Lining in the Equity Market

However, there is a slightly optimistic outlook with regards to the recent selling pace, which has begun to slow down. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services remarked that the trend of FPI selling seems to be softening in recent sessions. This decline in selling intensity in the last couple of days offers a glimmer of hope for Indian equities.

China’s Enticing Prospects Divert FPI Flows

The bright spotlight on Chinese equities has played a pivotal role in FPIs redirecting their focus away from India. Due to tempting valuations and favorable governmental policies towards big businesses in China, the Hang Seng Index has demonstrated a stunning Year-to-Date (YTD) return of 23.48%, in contrast to a -5% YTD return for the Nifty index. This outperformance has solidified China as a compelling investment choice for FPIs.

The Impact of Global Economic Factors

The reduced value of the dollar presents an additional challenge, expected to limit fund flows to the United States and potentially shift FPI patterns even further. A compounded layer of global uncertainties, notably Trump’s tariff policies, has further driven investor concentration towards domestic consumption sectors such as financials, telecom, hotels, and aviation.

Prospects for Indian Equities Amid Global Uncertainty

Despite their current status as net sellers, FPIs show signs of stabilization in the coming months, contingent on improved macroeconomic conditions. Investors are treading cautiously, watching carefully as global events unfold and anticipating the forthcoming corporate earnings season. A favorable turn in foreign investor sentiment could potentially reinstate the momentum for India’s market in the foreseeable future.

According to The Economic Times, while the current data on FPI behavior presents uncertainties, ongoing vigilance and strategic foresight remain key for both investors and economists.

(Disclaimer: Recommendations, suggestions, views, and opinions expressed by the experts are their own and do not represent the views of The Economic Times.)