The events in the last 48 hours have decidedly put the focus right on the FII action in Indian markets. This is particularly significant, as FIIs have been net buyers on nine out of the last sixteen trading sessions in February so far. Will US President Donald Trump’s tariff hike after the US Supreme Court verdict likely impact the FII sentiment?
That’s the big question we posed to a host of market experts. They pointed out that February has no doubt been slightly different in terms of the stance taken by foreign institutional investors. Though they have been net sellers in equity for the month so far, the amount is just Rs 2,000 crore. Barring February 13, when FIIs net sold equities worth Rs 7,395 crore, they have been net sellers for only 6 more sessions.
Most market experts pointed out that several factors are responsible for this slow but steady change in FII stance.
Is the FII selling trend changing? Key factors investors must watch out for-
Clear change in FII selling trend in February
As per National Securities Depository data the total FPI investment through exchanges till February 20 stood at Rs 14,177.66 crores. Additionally, FPIs had invested Rs 2,733.89 crores through the primary market taking the total investment in February tso far to Rs 16,911.55 crores.
Market veteran Arun Kejriwal believes that “So far if you see, February has seen a definite change in trends irrespective of what happened on Friday. Through February, barring one or two days, there have been net buyers or small sellers on almost all days. And this happened even before Friday. It means somewhere they believe that with whatever trade deal was hammered out between India, US, global markets, geopolitical situation, things seem to be fairly stable in India.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments, reiterated the sentiment and added that “there is a clear change in FPI flows in February. Big variations can be seen in sectoral investments in February. FPIs had sold heavily in IT stocks due to the Anthropic shock. But they were buyers in financial services and capital goods.”
How will the US Supreme Court verdict and Trump’s tariff action impact
However, there is never a dull moment across global geopolitics. The latest development, including the US Supreme Court verdict and US President Trump’s tariff announcement after that, is surely making investors apprehensive.
According to Arun Kejriwal, “We will have to watch over the next two working days globally how world markets behave, because I’m worried about something different. Having lost in the Supreme Court, US President Trump is also capable of doing something on the Iran front just to divert attention. If that happens, the geopolitical situation will become very tricky. Both the countries, the US and Iran, are unpredictable.”
He is apprehensive about how the global geopolitics pan out over the next few days and its possible impact on investor sentiment.
Will fundamentals take over going forward?
Global sentiment notwithstanding, market experts believe fundamental factors like earnings improvement and valuations could potentially take precedence going forward.
Vijakumar pointed out that “the trend of FPI buying witnessed in February, so far, is likely to continue going forward. A major factor driving the FPI inflows could be the improvement in corporate earnings. The Q3 FY26 results indicate a clear pickup in corporate earnings with a 14.7% earnings growth. This trend is likely to continue in the rest of FY26, too. As per the early estimates, FY27 earnings growth is likely to be around 15%. This will make Indian valuations fair and attractive for FPIs to turn buyers in India.”
Kejriwal added that “the good thing that happened in light of all this geopolitical tension is India’s GST reforms. The far-reaching implication of the GST reforms is definitely helping industry. So all of this augurs well. If I am an investor looking at India as one of my multiple choices, I find a pocket of comfort here, at least in the large-cap stocks.”
Conclusion
Going forward, market observers believe that geopolitics alone may not influence FII action. The improving earnings trajectory could turn out to be a significant factor.