Thus far in November, foreign institutional investors (FIIs) have been net buyers of Indian stocks, selling shares valued at Rs 3,788 crore, bringing the overall outflow to Rs 1,43,698 crore in 2025.
Vinod Nair, Head of Research at Geojit Investments, commented on the present developments, stating that this week's selling by foreign investors was tempered by improved Q2 results, declining inflation, and confidence regarding trade talks between the US and India.
"Throughout the week, bullish enthusiasm persisted. Expectations of earnings enhancements in H2FY26 led to a moderation in FII selling, which also helped the valuations.
However, weak global cues and growing worries about possible delays in the India-US trade talks caused markets to become erratic on Friday, he said.
Despite flows pouring into emerging market funds, international investors are still not making significant returns to India, according to Ross Maxwell, Global Strategy Lead at VT Markets, citing EPFR data.
Although there has been a noticeable improvement in foreign investor mood from the risk off sentiment earlier this year, flows are still cautious and tactical rather than suggesting a general structural change.
We may keep an eye on short-term indicators over the coming weeks to see if FIIs are getting ready for a more significant change," he stated.
In October, FIIs purchased domestic shares valued at Rs 14,610 crore. FIIs sold scrips of Rs 76,619 crore in Q3CY25, while foreign purchases totaled Rs 38,673 crore in the April-June quarter.
Significant withdrawals occurred at the beginning of the year, with the FII sell off reaching an astounding Rs 1,16,574 crore between January and March.
Although India is still strong from a macro perspective, Maxwell believes that FIIs are seeking both clarity in earnings and a reset in valuation.
Despite the recent corrections, valuations continue to be a source of frustration for FIIs. It continues to be a topic of contention for international investors who contrast India with less expensive prospects in Korea and Taiwan in addition to EM Asia.
Many FIIs want earnings growth to "catch up" before significantly raising exposure because they anticipate a value reset through time rather than price. As a result, the December-March earnings cycle will be crucial.
The VT Markets specialist stated. According to a report from ElaraCapital, Nifty PAT growth in Q2FY26 was subdued at 6.8% YoY due to poor performance in banking, IT services, FMCG, and energy.
It added that the Nifty EPS is expected to rise from Rs 1,047 in FY25 to Rs 1,083 in FY26E and then to Rs 1,256 in FY27E, indicating 16% increase. The Nifty EPS is expected to expand by a muted 3% for FY26E, setting a low base for a bigger rebound in FY27.
