Ongoing Selling Pressure from Foreign Institutional Investors (FIIs)
The trend of heavy selling by Foreign Institutional Investors (FIIs) in India shows no signs of slowing down. As of February 2025, total FII sell-offs since September 2024 have surpassed a staggering ₹3 lakh crore. In 2025 alone, these investors have already withdrawn over ₹1 lakh crore. After a significant sell-off in January amounting to ₹87,000 crore, the selling has continued into February, with ₹29,183.43 crore already withdrawn.
Monthly FII Selling Overview
To better understand the recent trends in FII selling, here’s a summary of monthly outflows:
| Month | Outflow (₹ Cr) |
|---|---|
| February (Till Feb 14) | -29,183.43 |
| January | -87,374.66 |
| December | -16,982.48 |
| November | -45,974.12 |
| October | -114,445.89 |
Table: FII Selling Since September 2024
Why Are Foreign Investors Selling?
Dr. V K Vijayakumar, the Chief Investment Strategist at Geojit Financial Services, pointed out that the selling might pause when the dollar index declines. It’s uncertain when this will happen, but it is inevitable. Despite various positive developments, such as a favorable budget, a cut in interest rates by the Reserve Bank of India (RBI), and some improvement in corporate performance in the third quarter, FIIs have continued their selling strategy.
Large-cap stocks, which make up a significant part of FII assets, have been heavily impacted. This relentless selling has made their valuations attractive, creating new opportunities for long-term investors.
Market Insights on the Dollar Index
Currently, the dollar index is trading around 106, having experienced a slight downturn of just over 1% in the past five days. Although it is down by 1.64% from its recent peak of 110 observed on January 13, 2025, it has increased by 2% over the past year. A closer look at the dollar index reveals the following trends:
| Timeframe | Returns |
|---|---|
| 5-day | -1.24% |
| 1-month | -2.07% |
| Year-to-Date | -1.65% |
| 3-month | +0.01% |
| 1-Year | +2.31% |
Table: Dollar Index Returns Over 1 Year
The strength of the dollar compared to other emerging market (EM) currencies continues to attract FII interest, as U.S. assets appear increasingly appealing.
High Valuations and Market Caution
The ongoing rise of the dollar index raises additional concerns. According to various analysts, high valuations in the Indian stock market have led to increased caution. Many investors are becoming wary of entering a market that appears overheated and are reassessing their positions.
Vipul Bhowar, Senior Director of Listed Investments at Waterfield Advisors, explains that global policy changes, particularly from the U.S., have created uncertainty for FIIs. This uncertainty is forcing them to refine their investment strategies in fast-evolving markets like India. Rising bond yields in the U.S. make these investments seem more secure and appealing, prompting FIIs to shift their focus away from Indian and other emerging market stocks.
Impact of Slowing Corporate Earnings
The situation is further exacerbated by a slowdown in corporate earnings and overall sales growth. Such stagnation weighs heavily on investor sentiment, contributing to the ongoing exodus of funds from the Indian market.
Conclusion
The continuous selling by FIIs in India raises questions about the market’s near-term future. As key indicators such as the dollar index fluctuate and corporate earnings face uncertainty, it will be crucial for investors to stay informed. While the current scenario presents challenges, it also opens up opportunities for long-term investors who can navigate the market carefully.
By closely monitoring these developments and understanding the implications of external factors, investors can make informed decisions about their portfolios. Ultimately, the prevailing conditions in the market will shape investor behavior and dictate the trajectory of FII participation in India moving forward.
