Analysts anticipate that foreign institutional investors (FIIs) will shift to buying mode in India due to favorable progress in the US-India trade agreement and an increase in earnings growth. This positive outlook is seen as a boost to investor confidence. In early 2026, FIIs have already started investing, continuing the trend from the previous year.
The year 2025 witnessed FIIs selling equities worth Rs 166,283 crore, impacting the Indian market performance and leading to a 5% depreciation of the rupee. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd., highlighted that the expectation at the beginning of 2026 was for FIIs to become buyers, driven by anticipated GDP growth and corporate earnings improvements. Additionally, hopes were high for the timely US-India treaty ratification.
However, geopolitical tensions escalated with US involvement in Venezuela and a lack of progress in trade negotiations. Negative remarks from the US commerce secretary suggested further delays in the trade agreement, influencing market sentiments. Consequently, FIIs intensified their selling activities in the last two trading days, with total cash market selling reaching Rs 11,784 crore by January 9.
Despite domestic institutional investors (DIIs) buying Rs 17,900 crore worth of equities in January, the Nifty index dropped by 618 points by January 9, reflecting weakened market sentiments. Last week’s sell-off was widespread, particularly affecting cyclical and policy-sensitive sectors. Energy, metals, and realty stocks faced significant declines due to concerns over global trade disruptions and commodity demand uncertainties. Banking stocks, including Bank Nifty, also experienced a downturn amidst cautious investor sentiment and ongoing FII selling pressure, as noted by Ajit Mishra, SVP of Research at Religare Broking Ltd.
Given the current volatile and uncertain global landscape, experts recommend a prudent and disciplined investment approach. While short-term rebounds may occur due to bargain hunting post-correction, sustained market upside is expected to be limited until there is more clarity on earnings, global trade dynamics, and FII inflows.
