Foreign portfolio investors (FPIs) continued their selling spree in Indian equities for the fourth consecutive trading session on Thursday, reflecting global risk-off sentiment amid rising US bond yields, geopolitical tensions, and profit booking in overheated sectors. Market analysts note that this persistent outflow pattern could keep Indian indices volatile in the near term.
Key Highlights
- Net Outflow Data:
According to NSDL data, FPIs sold equities worth ₹1,987 crore on July 4, following net sales of ₹2,150 crore, ₹3,012 crore, and ₹1,754 crore in the previous three sessions. The cumulative outflow in just four trading days has crossed ₹8,900 crore ($1.06 billion). - Reasons Behind The Sell-Off:
- US Bond Yield Surge:
The US 10-year Treasury yield spiked to 4.52%, its highest since May, as the Federal Reserve’s minutes suggested a longer pause before rate cuts, leading to capital flight towards safer assets. - Geopolitical Concerns:
Fresh escalations in the Russia-Ukraine conflict and tensions in the South China Sea have heightened global risk aversion. - Profit Booking:
Indian equities, which had rallied nearly 18% in 2025 YTD, are seeing profit-taking, especially in high-valuation sectors like consumer, retail, and IT.
- US Bond Yield Surge:
- Market Impact:
The Nifty 50 closed at 23,492, down 0.85%, while the Sensex shed 521 points to settle at 77,289. Midcap and smallcap indices also witnessed broad-based selling, ending 1.3% and 1.6% lower, respectively.
Sector-wise FPI Flows Snapshot
| Sector | Net FPI Flow (₹ crore) | Impact on Sector Index (%) |
|---|---|---|
| Financial Services | -650 | -0.9 |
| IT | -482 | -1.2 |
| FMCG | -280 | -0.4 |
| Oil & Gas | -250 | -0.7 |
| Metals | -150 | -0.6 |
| Pharma | +75 | +0.3 |
| Auto | +30 | +0.1 |
Note: Pharma and auto attracted marginal inflows due to defensive positioning.
Monthly FPI Trend – 2025
| Month | Equity Inflow/Outflow (₹ crore) | Debt Inflow/Outflow (₹ crore) | Hybrid & Others (₹ crore) |
|---|---|---|---|
| January | +33,254 | +10,900 | +125 |
| February | +19,872 | +5,780 | +92 |
| March | +14,260 | +3,110 | +67 |
| April | +22,530 | +2,980 | +40 |
| May | +15,122 | +1,730 | +25 |
| June | +9,874 | +950 | +10 |
| July (till 4th) | -8,933 | +120 | +5 |
Analyst Views On Current FPI Selling Trend
- Kotak Institutional Equities:
FPIs are rotating away from emerging markets temporarily as US yields firm up. However, India remains structurally attractive due to robust earnings visibility in FY26. - ICICI Securities:
Short-term volatility may persist, but inflows could resume once clarity on US monetary policy emerges. Sectors like banking, capital goods, and defence manufacturing remain favourites. - Motilal Oswal:
India’s premium valuation (Nifty at 20x FY26 EPS) could deter flows in the short term, but government capex push and rural demand revival will support growth stocks.
Impact On Indian Rupee
The rupee closed at 83.51 against the US dollar, depreciating 11 paise due to persistent FPI outflows and dollar index strength. Analysts expect INR to remain in the 83.40-83.70 range near-term.
Global Context Behind FPI Actions
- US Fed Minutes:
Reiterated data dependency for rate cuts, delaying easing expectations to possibly Q4 2025. - Crude Oil Volatility:
Brent futures fell below $80 per barrel, supporting India’s macros but indicating global demand concerns. - China PMI Data:
Weaker-than-expected factory output figures from China have renewed worries about global growth momentum.
Historical FPI Behaviour During Yield Surges
| Year | US 10Y Peak (%) | India FPI Net Equity Flow ($ bn) | Nifty 50 Return (%) |
|---|---|---|---|
| 2018 | 3.24 | -4.4 | +3.2 |
| 2022 | 4.20 | -18.4 | +4.3 |
| 2025 YTD | 4.52 | +9.1 (incl. April-June inflows) | +18 |
What Should Investors Do Now?
- Stay Disciplined:
Market experts advise avoiding panic exits as India’s growth fundamentals remain intact, with FY26 GDP projected at 7.3%. - Focus On Earnings:
The upcoming Q1FY26 earnings season will offer cues on sectoral resilience, especially in banking, FMCG, and infra. - Maintain Asset Allocation:
Use this correction to rebalance portfolios aligned with long-term goals, as volatility may remain elevated till US rate cut clarity emerges.
Conclusion
Despite four straight sessions of FPI outflows, India continues to remain a key structural growth story among emerging markets. While global macro headwinds, valuation concerns, and geopolitical risks are prompting FPIs to book profits, domestic institutional flows and retail participation continue to provide support at lower levels. Investors should brace for near-term volatility but maintain a disciplined approach, leveraging market corrections to accumulate quality stocks in alignment with their risk profile and long-term wealth creation plans.
Disclaimer: This news article is for informational purposes only. It does not constitute financial advice. Readers must consult SEBI-registered advisors before making investment decisions.
