Foreign investors are still pulling money out of Indian equities even though companies are expected to post solid earnings in the next quarter.
FIIs continue to sell Indian equities
In January alone, foreign institutional investors (FIIs) sold Indian stocks worth over ₹8,400 crore in the cash market. Since July 2025 they have been net sellers, with total sell‑offs of about ₹1.85 lakh crore by the end of last year. 2025 saw the highest ever outflow of $18.8 billion from Indian equities.
Q3 earnings outlook looks brighter
Analysts expect the Nifty index’s profit after tax (PAT) to grow around 9.8% year‑on‑year in the third quarter of FY26. Excluding banking and financial services, the growth could be as high as 16.2%.
- IT services: +10% YoY
- Auto sector: +33% YoY
- Metals & mining: +25% YoY
- Telecom: +64% YoY
- Industrials: +31% YoY
Other firms, such as Axis Securities, forecast overall revenue, EBITDA and PAT growth of roughly 12%, 10% and 4% respectively for the same period.
US tariff worries and a delayed trade deal
Market sentiment is shaky because of renewed concerns about U.S. tariffs on Indian goods. If the “Sanctioning of Russia Act” becomes law, tariffs could rise to as much as 500%.
Negotiations for a comprehensive India‑U.S. trade pact have stalled, adding uncertainty to the rupee and to foreign capital flows.
What analysts say about future FII inflows
Most experts agree that stronger earnings could lure FIIs back, but a solid trade agreement is likely needed for sustained inflows.
- Geojit Investments: Good Q3 earnings help, but without a trade deal the macro picture stays risky.
- Kotak Securities: Better earnings may improve sentiment, yet a weaker U.S. market and lower bond yields would make Indian assets more attractive.
- Religare Broking: Current valuation premium is below historic levels, so strong earnings could trigger a re‑rating even if the trade deal is delayed.
Bottom line for retail investors
Even with promising earnings numbers, FIIs are still net sellers because of tariff fears and trade‑deal uncertainty. Retail investors should keep an eye on any progress in the India‑U.S. talks and watch how U.S. market trends evolve, as both factors can influence capital flows into Indian stocks.
Remember, this is perspective, not a prediction. Do your own research and consider consulting a certified financial advisor before making any investment decisions.