Foreign Funds Resume Selloff In Indian Stocks As Global Volatility Looms In 2025

Foreign investors began pulling back from Indian equities as renewed global market volatility cast a shadow over 2025, reversing recent inflows after a record exodus for global funds.

Foreign funds have offloaded domestic stocks worth over Rs 24,000 crore in the last 10 sessions while domestic funds bought stocks worth nearly Rs 25,000 crore during the same period, according to provisional data from the NSE.

The renewed selling by foreign investors is seen after the $5.14 trillion Indian stock market saw a record selloff by the FIIs from September end to the end to November. During the market rout in October, FIIs took out a record Rs 1.6 lakh crore while domestic investors helped avoid a huge crash by buying stocks worth Rs 1.58 lakh crore.

So far in 2024, foreign funds have bought shares worth Rs 1,656 crore led by inflows seen in the primary market, according to data from the National Securities Depository Ltd. This year saw a record Rs 1.2 lakh crore inflows in the primary market space by the global fund when they pulled out stocks worth Rs 1.19 lakh crore in the secondary market.

This trend of selling through the exchanges and buying through the primary market is discernible in the year-long trend in 2024, according to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. The selling through exchanges is mainly due to the high valuations, he said in a weekly note. "Investing through the primary market is mainly due to the fair valuations."

Analysts warn global markets are expected to continue seeing heightened volatility in the first half of the calendar year 2025 as the new US administration under Donald Trump is likely to implement significant policy changes.

“The first couple of quarters will contain more volatility, stemming from the change in US administration and its new policies,” Sanjay Mookim, head of research at JPMorgan India, told NDTV Profit.

Key areas of focus include tariffs, immigration, and deficit reduction, all of which could have substantial global repercussions, he said. “Many of these policies will drive consequences and decisions for other large economies.”

In early 2025 FIIs may again turn sellers into equity since the dollar has been appreciating and the US 10-year bond yields are attractive at around 4.4%, Vijayakumar said. "FIIs will turn buyers in India when there are indications of growth and earnings recovery."

Since Donald Trump secured his second term in November, the dollar index has risen by nearly 4% and currently trades over the 108 mark.

However, HSBC Global Research has cut the 2025 year-end target of India benchmark gauge—BSE Sensex—as risks of earnings downgrades amid high valuations weigh on the global brokerage.