FPIs resume selling spree in Indian stock market; Financials, Power, Capital Goods, IT sectors lead outflows in January | Stock Market News

Foreign Portfolio Investors (FPIs) have commenced 2025 on a negative note in the Indian stock market, reversing their buying trend from December 2024. In the first fortnight of January, FPIs sold Indian equities worth over ₹48,000 crore, marking a sharp contrast to the ₹15,447 crore of net inflows recorded in December.

The outflows were broad-based, driven by heavy selling across key sectors. Analysts attribute this trend to heightened concerns about corporate earnings, a challenging global economic outlook, and macroeconomic headwinds.

“As of January 2025, FPIs have resumed being net sellers, withdrawing funds due to concerns about corporate earnings and the overall economic outlook. Key challenges for the recovery of FPIs include fears of a prolonged global recession, geopolitical tensions that may negatively impact investor sentiment, and a stronger US dollar along with rising bond yields, which could prompt investors to prefer safer US assets over Indian markets,” said Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors.

Sectors Witnessing the Largest FPI Outflows

The Financial Services sector bore the brunt of FPI outflows, registering net sales worth ₹12,204 crore between January 1 and 15. This marks a stark reversal from the sector’s inflows of ₹3,086 crore in December 2024.

Core industrial sectors also faced heavy selling pressure. The Power sector saw outflows worth ₹3,115 crore, Capital Goods reported selling to the tune of ₹2,620 crore, and Metals & Mining registered outflows of ₹1,997 crore, during the first fortnight of January 2025, NSDL data showed.

Information Technology witnessed FPI selling to the tune of ₹1,927 crore during the period.

Moreover, sectors linked to consumption were not spared either, as inflationary concerns and weakening rural demand contributed to waning investor confidence. Automobile & Auto Components, Fast-Moving Consumer Goods, and Consumer Durables sectors saw FPI selling amounting to ₹1,924 crore, ₹1,134 crore and ₹931 crore, respectively for the said period, according to NSDL data.

Similarly, FPIs offloaded Construction sector shares worth ₹1,623 crore and Realty sector shares totalling to ₹608 crore.

Healthcare and Oil, Gas & Consumable Fuels recorded outflows of ₹1,460 crore and ₹1,203 crore, respectively.

Sectors Attracting FPI Inflows

Amidst the broader selling trend, FPIs maintained a cautious interest in a few sectors of the Indian stock market. Textiles emerged as the top-performing sector, recording net inflows of ₹205 crore during the period. The Media, Entertainment & Publication sector attracted inflows of ₹177 crore, while modest inflows were observed in the Chemicals sector at ₹42 crore.

Outlook for FPI Trends

The current risk-averse sentiment among FPIs is underscored by the strength of the US dollar and rising US bond yields. However, improvement in corporate earnings and increased government infrastructure spending could potentially reverse this trend.

“A cyclical improvement in corporate earnings, along with stronger GDP growth driven by resilient domestic consumption and increased government spending on infrastructure projects, could lead to a potential turnaround in FPI flows into India,” said Vipul Bhowar.

Additionally, the Reserve Bank of India’s potential interest rate cuts may create a more favourable borrowing environment and make US bonds less attractive, further encouraging FPI inflows, added Bhowar.

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