Foreign institutional investors (FIIs) continue to dump Indian equities despite improvement in domestic fundamentals and expectations of a healthy earnings season as corporates are all set to announce their December quarter (Q3FY26) performance.
The total FII selling ( cash market) through January 9 stood at Rs 11,784 crore. The market sentiments have turned so weak that despite domestic institutional investors (DII) buying of Rs 17,900 crore in January 9, Nifty fell by 618 points in the week ending 9th January.
"FII investment in early 2026 has begun with the continuation of the trend of the previous year,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited. He added, “At the beginning of 2026 the expectation was that FIIs will turn buyers on improvement in GDP growth and corporate earnings.”
In 2025, FIIs had net sold equity worth Rs 166,283 crore, the highest annual outflow ever recorded in the Indian capital market. The sharp selling impacted the performance of the Indian market and also weakened the rupee by about 5%.
Stating the reason for such an extensive outflow, Vijayakumar said that the market expectation was that the much-delayed US-India treaty would materialise early in the year. But geopolitical developments took a turn for the worse with the US intervention in Venezuela and the absence of positive developments in the trade talks.
“Some negative comments from the US Commerce Secretary gave the impression that the trade agreement will be further delayed. This impacted the market sentiments and FIIs continued selling by increasing the volume of selling in the last two trading days. It appears that if FIIs are to turn buyers in India sentiments have to improve with positive developments on US-India trade agreement and uptick in earnings growth,” he added.
India’s benchmark equity indices - BSE Sensex and NSE Nifty 50 - extended losses for the fifth straight session on Friday (January 9) amid concerns over potential new US tariffs, FII outflows, geopolitical tensions, and caution ahead of Q3FY26 earnings. During the week, the Nifty crashed 618.35 points (2.35%) and the Sensex erased 2,111 points (2.46%). This is the biggest weekly fall for the frontline indices in more than 3 months.
The Nifty Smallcap and Midcap indices fell about 3% each this week, highlighting weakness in the broader equity market.
Ravi Singh, Chief Research Officer from Master Capital Services said that the recent market weakness can largely be attributed to four key factors. Firstly, global sentiment turned cautious after the U.S. President approved a bipartisan Russian sanctions bill, paving the way for heavy tariffs, up to 500%, on major buyers of Russian energy products. Secondly, lingering uncertainty surrounding the U.S.–India trade deal continued to dampen investor confidence, as markets remain watchful for concrete progress. Thirdly, expectations of mixed Q3 earnings, and lastly sustained FIIs selloff, added Singh.
The main focus this week will be the third-quarter earnings with heavyweight IT companies such as HCL Tech, TCS, Infosys, Tech Mahindra and Wipro all set to announce their Q3 earnings. Index heavyweight Reliance Industries would announce Q3 results on Friday (January 16). Globally, markets will keenly watch developments around the US Supreme Court verdict on the legality of Trump tariffs.