Foreign Portfolio Investors (FPIs) Turn Net Sellers in Indian Equities: A Strategic Shift
In July 2025, a notable shift occurred in the behavior of Foreign Portfolio Investors (FPIs) in the Indian equity market. While FPIs turned net sellers in the secondary market, their activity in the primary market remained robust, indicating a strategic recalibration amid concerns over valuations and the relative underperformance of Indian equities.
Selling Pressure in the Secondary Market
According to data from the National Securities Depository Limited (NSDL), FPIs sold equities worth ₹10,775 crore through the secondary market between July 1 and July 18, 2025. This selling trend reflects a growing caution among foreign investors, who appear to be reassessing their positions in light of stretched valuations. The Indian equity market had previously rallied over 15% from March to June, but July saw a decline of more than 2% in major indices like the Sensex and Nifty, driven by disappointing earnings from key financial and IT companies and global trade uncertainties.
Continued Investment in the Primary Market
Despite the selling in the secondary market, FPIs demonstrated a strong appetite for investments in the primary market, injecting ₹5,251 crore during the same period. This investment was primarily channeled through initial public offerings (IPOs) and qualified institutional placements (QIPs). Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that this dual behavior of FPIs indicates a valuation-sensitive approach. He stated, “Whenever valuations get stretched in the secondary market, they sell — but consistently buy in the primary market, where valuations are fair.”
A Year of Contrasting Trends
For the calendar year 2025, up to July 19, FPIs have sold equities worth ₹1.10 lakh crore in the secondary market while investing ₹27,239 crore in the primary market. This trend suggests that FPIs are not entirely exiting Indian equities; rather, they are reallocating their exposure based on perceived value and return potential. The ongoing underperformance of Indian equities compared to other emerging markets and the MSCI Emerging Markets Index may have further influenced FPI selling.
Market Dynamics and Sector Performance
The Indian equity market has faced headwinds in July, with the Nifty50 closing at 24,968 and the BSE Sensex at 81,757 on July 18. Both indices logged their third consecutive weekly loss, with declines of 0.7% and 0.9%, respectively. Private banks led the sectoral declines, falling nearly 2% for the week, followed by financials and IT, which saw losses of 1.1% and 1.5%, respectively. Notably, Axis Bank shares tumbled 5.2% on Friday alone, following a surprising drop in quarterly profit, while HCLTech, India’s third-largest IT services firm, fell 5.5% for the week after revising its full-year operating margin forecast downward.
Looking Ahead: Earnings Season and Trade Talks
As investor focus shifts to the upcoming earnings season, there is also anticipation surrounding potential developments in India-US trade talks, particularly ahead of the August 1 deadline. Earlier statements from US President Donald Trump suggested that a deal with India is “close,” which could provide some support to market sentiment.
Conclusion: A Cautious Yet Opportunistic Approach
The recent data on FPI activity underscores a cautious yet opportunistic approach to investing in Indian equities. While the secondary market may continue to face pressure due to elevated valuations and global uncertainties, sustained activity in IPOs and primary issuances could persist, especially if pricing remains attractive. This strategic shift highlights the dynamic nature of foreign investment in India, where FPIs are navigating a complex landscape of opportunities and challenges.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own and do not represent the views of the Economic Times.)