Foreign institutional investors (FIIs) have divested more than ₹1 lakh crore in Indian equities since July, affecting market sentiment. However, steady domestic inflows have provided some support, as indicated by provisional stock exchange data. This sell-off, attributed to disappointing earnings, stretched valuations, and uncertainty surrounding US tariffs, has led to a range-bound performance of the indices. From July 1 to September 8, FIIs sold a total of ₹1.02 lakh crore in equities, including ₹7,800 crore during the initial six sessions of September. Looking ahead, FIIs may either decrease their selling or shift to buying as signs of a market rebound emerge, driven by repo rate cuts and GST reforms, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.
In 2025, FIIs recorded net sales of ₹2.18 lakh crore, while domestic institutional investors (DIIs) offset this with net purchases of ₹5.37 lakh crore, maintaining their status as consistent net buyers in the cash market since August 2023. In September, FIIs continued their selling trend with a total of ₹11,169 crore divested by September 13, based on NSDL data. The limited growth in corporate earnings has been a significant factor contributing to FII outflows. Analysts noted that valuations for small- and mid-cap stocks remained elevated in August, while large-cap stocks adjusted towards long-term averages.
The comparatively higher valuations in India relative to markets like China, Hong Kong, and South Korea have prompted FIIs to sell in India and invest in more affordable markets.
