Foreign Institutional Investors (FIIs) Dump Rs 7,608 cr in Two Sessions After Rs 1.66 Lakh Cr Sell-Off in 2025: Why Experts Are Optimistic About a Trend Reversal in 2026
The financial landscape for Foreign Institutional Investors (FIIs) in India has been tumultuous, particularly following a staggering sell-off in 2025. As 2026 begins, investors witness a continuation of this trend, with FIIs selling Indian equities worth Rs 7,608 crore in just the first two trading sessions.
Heavy Outflows Continue
– In December 2025 alone, FIIs were net sellers, offloading shares worth Rs 22,611 crore.
– Total outflows for the entire year reached a monumental Rs 1,66,286 crore, showcasing the gravity of the situation.
– V K Vijayakumar, Chief Investment Strategist at Geojit Investments, referred to this period as the worst selling by FIIs since they began investing in India.
A Grim 2025 for Foreign Investments
– The sell-off reached an astounding Rs 2.40 lakh crore in CY2025, marking it as a historical record for foreign investors in the secondary markets.
– Despite this, FIIs managed to invest Rs 73,909 crore in the primary market, partially mitigating the adverse effects of their selling spree.
– December’s figures were particularly alarming, with FIIs shedding shares worth Rs 30,332 crore.
Factors Behind the FII Exodus
Vijayakumar pointed to elevated valuations in India and the vigorous AI trade as significant contributors to the FII outflows. Furthermore, this continued selling has led to a depreciation of the Indian rupee against the US dollar. The rupee has been the worst-performing major currency this year, falling nearly 5%.
Overview of 2025
– Q3 of 2025 saw FIIs selling shares worth Rs 11,766 crore, in stark contrast to Q2 when inflows had totaled Rs 38,673 crore.
– The year commenced ominously, as foreign investors withdrew Rs 1,16,574 crore during the January-March quarter.
Outlook for 2026: The Turning Point for FIIs?
Looking ahead, Vijayakumar suggests a potential shift in FII strategies for 2026. He anticipates that improving economic fundamentals in India could attract net inflows. Key points include:
– Strong GDP growth and an optimistic outlook for corporate earnings are likely to positively influence FII sentiment.
– Nilesh Jain, Head Vice President – Equity Research at Centrum Broking, concurs, forecasting that 2026 may outperform the dismal previous year, projecting a Nifty target of Rs 29,731 by December, which implies a 13% increase.
Reasons for Optimism
– Improving macroeconomic indicators, robust Q2 GDP growth, and easing inflation rates underscore positive investor sentiment.
– The significant underperformance among emerging markets (EMs) last year, with India ranking poorly, was attributed to rupee depreciation and steady FII selling.
In conclusion, while the sell-off in early 2026 seems alarming, experts remain optimistic about a trend reversal as various macroeconomic indicators suggest a brighter future for Foreign Institutional Investors in India. The forthcoming year could provide opportunities for recovery and growth, creating a conducive environment for renewed investment.