After Nearly Two Weeks Of Buying, FPIs Turn Net Sellers: What's Triggering The Shift

Foreign Portfolio Investors (FPIs) turned net sellers in the domestic stock market during July's first four trading sessions. This comes after a nearly two-week buying streak seen in the latter half of June. According to data from National Securities Depository Limited (NSDL), FPIs offloaded equities worth Rs 4,923.19 crore between July 1 and July 4. Earlier, the latter half of June saw a strong FPI inflow of Rs 17,934.37 crore, driven largely by the easing of the Iran-Israel conflict, the subsequent softening of crude oil prices, and the Reserve Bank of India's (RBI) surprise 50 basis point (bps) rate cut.

During June's second half, FPIs took positions in auto and ancillary, oil and gas, and financial services sectors. The auto sector saw an inflow of Rs 5,020 crore, the oil and gas sector saw an inflow of Rs 4,938 crore, and the financial services sector witnessed an inflow of Rs 4,261 crore.

Telecommunication, information technology, and consumer services also saw inflows of Rs 3,620 crore, Rs 2,879 crore, Rs 2,809 crore, respectively.

On the other hand, FPIs sold equities worth Rs 3,191 crore from the power sector, and Rs 3,022 crore from capital goods.

Why FPIs Are Selling In India

The market has been trading on a cautious note ahead of the July 9 tariff pause deadline. In April, US President Donald Trump imposed a 26 per cent tariff on Indian goods. However, he later announced a 90-day window for negotiations with the countries affected, including India.

Talks between India and the US are currently underway; however, the uncertainty surrounding the trade deal has led investors, including FPIs, to adopt a wait-and-watch mode, weighing on overall market sentiment.

Weakening Dollar Supports FPI Flows

Meanwhile, the US Dollar Index Futures saw a consistent and gradual decline over the past six months, falling from highs of 110 to around 97.

The weakening of the US Dollar is often seen as a sign of improving global risk appetite. This makes emerging markets like India more attractive to foreign investors, who seek higher returns than what developed markets offer.

What Will Guide FPI Flows This Week

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the return of FII buying will largely depend on two key factors: progress on a potential India-US trade deal and early signals from Q1 FY26 earnings. A positive outcome on either front could lift market sentiment and attract foreign inflows, while any disappointment may weigh on both equities and FII activity, he said.

Most key sectors, barring FMCG, are seeing rotational interest, and IT could spring a positive surprise if earnings meet expectations, said Ajit Mishra, SVP – Research at Religare Broking. He also expects renewed buying interest in pharma and energy stocks in the near term.