The FII selling is picking momentum. After a net sell of a whopping Rs 10,716.64 crore on March 13, foreign institutional investors net sold Rs 9,365.52 crore on March 16. With this, they have net sold over Rs 66,000 crore in March so far. For 2026 so far, they have already net sold over Rs 1 lakh crore. What does it signal?
Well, market veteran Arun Kejriwal believes that the “signal that you get from them is they are not worried about India but about the world. They believe that the Middle East crisis won’t get over in a hurry. They do not have an alternate investment, so they are liquidating position here in India. They are keeping cash as there is uncertainty in the market with regards to Trump’s next policy action.
FIIs overleveraged
Deven R Choksey, Founder and MD of DRChoksey Finserv corroborated the view and pointed out that “FIIs are over-leveraged.”
He explained how “They trade from our market and shift money to other markets, and they shift money from other markets, bringing money back to our market. So they keep trading. And one of the primary reasons for their trading is also the currency.”
He pointed out,, “because they sell and take the money out. I think the currency depreciates more. So they are successful. India should basically get into the subject of opening up the current account, convertibility, and capital account convertibility. If they do that, I think it will work well for them.”
Why is India a ‘sell on rally’ for FIIs now?
Several market observers FinancialExpress.com spoke earlier to also reiterated the view that increasingly we are seeing FIIs using every upmove in Indian markets to exit positions. The question then is, what is prompting this ‘sell on rally’ trade?
Most highlighted that two of the biggest triggers have nothing to do with India. The continuing escalation of the conflict across Middle East and the dollar’s strength have been weighing on FII sentiment.
West Asian conflict continues
The world is increasingly feeling the heat of the Hormuz crisis. US President Donald Trump repeated his call for help to unblock the Strait of Hormuz after some vessels sailed through it. Trump called for global efforts to reduce consumer energy prices during the Iran war.
The economic and geopolitical consequences of the continued violence and the escalation of the conflict across West Asia are unfurling rapidly. This is making the foreign institutional investors apprehensive. As a result of this, they are liquidating assets.
Dollar drama in focus
The dollar is the other key protagonist in this act. For the past few sessions the Dollar Index is close to levels seen last April-May. Though the Dollar Index softened slightly, it is dangerously close to the 100 levels. In the last 1 month, the dollar has gained as much as 3%.
The rupee, as a result, has been on a weak pitch. Additionally, surging crude oil prices and foreign fund outflows triggered by geopolitical uncertainties also acted as limiting factors. As a result of all of these, the rupee continues to be below the key 92/$ levels for more than 3 consecutive sessions.
When will FIIs return to India
The big question at this juncture is what can trigger a change in this FII selling trend?
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments pointed out that, “If their sustained selling strategy is to change, there should be clear indications of earnings recovery in India. In the present uncertain context, this will take time.”
As the countdown for the Q4 earnings season begins, investors are watching out for any indication of change in trend. Till then, Arun Kejriwal advised retail investors to “stay on the fence till the uncertainty passes. You have to wait for clarity to emerge.”