Foreign investors net sell Rs 4,285 crore from equities in first 3 days of 2025

“FIIs are likely to continue to sell going forward, so long as the dollar continues to rally and the US bonds yield attractive returns. The dollar index at around 109 and the 10-year bond yield above 4.5 per cent are strong headwinds for FII flows,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

In the previous calendar year (2024), FPI activity remained muted, as they pumped in Rs 427 crore on a net basis into the domestic equity market, a steep fall of 99.75 per cent from the robust inflows of Rs 1.71 lakh crore in 2023. This shift in FPIs’ strategy was largely on account of concerns over the valuation of Indian stocks, below-expected domestic GDP growth in the second quarter of fiscal 2025 (5.4 per cent), weak corporate earnings and higher US bond yields.

In the first three days of 2025 (January 1-3), while foreign portfolio investors net sold Rs 4,309.93 crore worth of equities in the secondary market, they purchased Rs 25.02 crore through the ‘primary market and others’ category, the NSDL data showed. Purchases in the primary market include buying through preferential allotment, rights issue, initial public offers and buyback of shares.

“The general perception that the market has turned weak due to sustained FII selling during the last three months is largely true. However, what is not generally appreciated is that even while selling in the cash market through exchanges, FIIs have been buyers through the primary market. They have been big investors through the (qualified institutional placement) QIP route,” he said.

The trend of selling in the secondary market, or cash market, and buying in the primary market by FPIs was witnessed in 2024 as well. In the cash market, FPIs net sold Rs 1.21 lakh crore while investing Rs 1.22 lakh crore on a net basis through the primary market route in 2024, according to the NSDL data.

In December 2024, FPIs net sold equity for Rs 2,589.63 crore through exchanges and bought equity for Rs 18,036.13 crore through the primary market and others category.

“The message is clear: FII selling is due to high valuations in the secondary market. In the primary market where the valuations are fair, FIIs have been sustained investors,” Vijayakumar added.

FPIs will keenly watch the third quarter results of corporate, which will start from this week, to decide on their action plan, analysts said.