A sharp decline in Indian equities, triggered by U.S. President Trump’s reciprocal tariffs, has led to a renewed sell-off by foreign portfolio investors (FPIs) after a brief buying spurt in late March. Between April 1 and 11, FPIs offloaded equities worth Rs 31,988 crore (NSDL data), reversing their net purchases during March 20–27.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments said that a clear pattern in FPI strategy will emerge only after the ongoing chaos dies down. In the medium term FIIs are likely to turn buyers in India since both the US and China are heading for an inevitable slowdown as a result of the ongoing trade war.
“Even in an unfavourable global scenario India can grow by 6% in FY 26. This, along with better earnings growth expected in FY 26, can attract FPI investments into India once the dust in the market settles down,” stated Vijayakumar.
The currency’s decline has further dented FPI returns. The Indian rupee posted its worst weekly drop since February, depreciating 0.9% amid global volatility, though it pared losses to close at 86.04 against the dollar on Friday. Analysts believe that the turbulence caused in the global equity market has forced investors to move into safer asset class.
FY25 marked a record annual FPI withdrawal of Rs 1.27 lakh crore - the second-highest single-year outflow - as investors retreated from Indian equities since late September. The sell-off played a major role in dragging the Sensex and Nifty down nearly 15% from their September 2024 peaks.
FPIs initially shifted funds to more attractive markets like China, but Trump’s trade policies and weaker-than-expected Indian corporate earnings have exacerbated the exodus.
Meanwhile, India’s equity market this week will be guided by developments on tariff front, Q4 results and inflation data. Markets will remain closed on April 14 (Ambedkar Jayanti) and April 18 (Good Friday), limiting trading to three days.
Puneet Singhania, Director at Master Trust Group said that the upcoming week is set to be volatile for global and Indian markets, as the trade war between China and the US intensified with both countries imposing tariffs on each other causing turmoil in the markets.
“A strong marubozu candle formed on the weekly chart, indicating buying interest at lower levels. However, India VIX surged 46% this week to hover near 20, reflecting continued high volatility. The index is trading below its crucial 21-day and 55-day EMAs, hinting a weak trend,” said Singhania.
He added, “Key supports lie at 22,500 and 22,200, while resistance is seen near 23,050. In this uncertain environment, Nifty remains a sell-on-rise market. Traders should stay cautious and avoid aggressive long positions until volatility subsides and technical strength is confirmed.”