The Indian markets may have recouped all Trump tariff losses since early April but the direction of FII flows haven’t seen any meaningful alteration so far in 2025. While it is true that the extent of the outflows are not as huge as seen in January and February, FIIs continue to be net sellers in India. After a brief week of buying in March, they again resumed selling. Can one expect any change of direction in the near-term?
Interestingly, what India is seeing seems to be an extension of a global emerging market trend. FPI flows in April have been negative for all key emerging markets (except Taiwan). The outflows from India has been amongst the highest at $1,877 million followed by the likes of Brazil, Indonesia, Malaysia, Philippines, South Korea, Thailand and Vietnam. Taiwan has been an exception clocking net inflows of $446 million.
How are the Dollar rates, gold and bond yields poised now?
However, what’s changed now is the global construct and some global indicators like the Dollar Index, Gold rate and US Bond Yields are at cross roads.
Dollar Index at 2025 lows
The Dollar Index has slumped to its lowest levels in 2025 an dis now over 8% from January highs of 110. It is now trading well below 100 mark and lost over 3% in last 5 trading sessions. The dollar Index has been trending lower since February and prices breached the 100 mark on April 11.In fcat, the greenback has now fallen toa fresh 7-month low against the yen. Several analysts had earlier noted that one of the key reasons for the allocation of funds to dollar denomited assets have been the dollar’s relative strength globally. However, they also pointed out that a sudden knee jerk change in allocations is unlikely. Global investors are likely to take stock of the market dynamics and EMs including India may see a greater chunk of foreign inflows towards the second half of 2025.
Gold hits fresh highs
Gold, the favourite safe haven asset, has been following a trajectory that is exactly opposite that of gold. Spot gold rates have skyrocketed above $3,300/Oz smashing all-times highs clocking a historical surge. Some of the key factors helping the surge in gold prices today include escalating geo-political tension, tariff related uncertainty coupled with a weakening dollar and Central Bank buying globally. All these factors are supporting the surge in gold prices.
Kaynat Chainwala, AVP-Commodity Research, Kotak Securities added that “ Today, COMEX gold surged to a record high of $3,311.70 per ounce, driven by growing trade war concerns after the US government tightened export rules to China. Trump also announced an investigation into whether tariffs are needed on critical minerals, further fueling market anxiety. Besides, investors are eyeing US retail sales data and a speech from Fed Chair Jerome Powell for further clues on the direction of monetary policy.”
US bond yields heading north
The 10-year US Treasury yield has shot up more than 70 basis points to a near two-month high of 4.59%. According to experts, though Trump’s surprise 90-day backtrack on reciprocal tariffs, except on China, has calmed markets, investor sentiment has soured considerably. Accordsing to a Reuters report, there are speculaltion about a large-scale global exodus away from U.S. assets may already be underway
March analysis: FII selling maximum in 4 sectors
If the trend in March is any indication, most analysts believe that persistent concerns over global inflation, tighter monetary policies by major central banks, geopolitical tensions and US tariff uncertainties prompted FPIs to reduce exposure to emerging markets like India.
The overall, interest for FPIs or foreign investors is focussed primarily on BFSI and many other sectors saw significant selling pressure A quick look at data suggests that
-Consumer Services led outflows with $353 million in for March 2025.
-Automobile & Auto Components saw $327 million net outflow in March, despite some buying in the second half.
-Oil & Gas posted $397 million in net sales, though buying resumed in later half of March
-Cement and Consumer Durables recorded moderate outflows of $183 million and $174 million last month
Is there a potential of FII coma back soon?
Given the global set-up, the question is can one expect a comeback from FIIs anytime soon? Jaykrishna Gandhi, Head – Business Development, Institutional Equities, Emkay Global Financial Service concluded that, “The stars are now aligning for a strong rally for India. Earnings estimates are bottoming out and we expect the downgrade cycle to arrest. Valuations have also corrected . The improved visibility for the US economy is an additional positive. We now expect SMIDs to reverse their strong underperformance vs large-caps. We retain our Nifty target at 26,000 for FY26.”