FPIs selling in Indian stock market continues; ₹22,500 crore withdrawn in January so far

Foreign portfolio investors (FPIs) extended their selling streak into the third week of January 2026, as sentiment was dampened by the continued delay in the trade deal between India and the US, further compounded by additional tariff threats from US President Donald Trump.

The US had already imposed an initial 25% tariff, followed by an additional 25% tariff on India due to Russian oil purchases, which Washington views as helping to fund Russia's war in Ukraine.

India and the US have held multiple rounds of trade negotiations but have not yet reached an agreement. The delay also caused FPIs to remain net sellers in the Indian market for most of 2025, withdrawing a record ₹1.66 lakh crore, according to NSDL data.

The FPI sell-off extended into 2026 as well, with another ₹22,530 crore withdrawn from the Indian stock market so far this month, NSDL data showed. However, support from domestic institutional investors (DIIs) continued, as they purchased local stocks worth ₹34,076 crore during the same period.

Will FPI selling continue as AI trade shapes 2026 market?

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said that the total FPIs selling for January up to the 16th stood at ₹22,529 crores. This month FPIs were sellers on all days except one. The underperformance of India vis-a-vis other major markets is continuing in early 2026 also. The YTD return from Nifty 50 stands at -1.73%.

He highlighted that a significant feature of market behaviour in 2025 was that India’s tepid performance—Nifty returned only 10% last year—came despite massive DII investments of ₹7.44 lakh crore, which completely eclipsed total FII selling of ₹1,66,283 crore.

He explained that the principal reason for this muted performance was poor earnings growth and elevated valuations in India. The continuing uncertainty over the US-India trade agreement also weighed on investor sentiment.

Vijayakumar further said that the FPI selling trend may continue until positive triggers for a market rally emerge. He added that the AI trade, which dominated the stock market trend in 2025, is continuing in early 2026 as well, though a reversal of this trend might occur sometime later in 2026.

Earnings to drive short-term market direction

Mr. Ajit Mishra, SVP of Research at Religare Broking, noted that the upcoming week is expected to be data-heavy and crucial for short-term market direction. According to him, participants will initially react to the earnings of key heavyweights such as Reliance Industries, HDFC Bank, and ICICI Bank.

He added that focus will then shift to the broader set of Q3 earnings from several large- and mid-cap companies across sectors. Mr. Mishra also highlighted that key domestic releases would include PMI readings for manufacturing, services, and composite, along with data on bank loan growth, deposit growth, and foreign exchange reserves, which will be closely monitored.

"Thereafter, focus will shift to the broader set of Q3 earnings from several large and mid-cap companies across sectors. Key domestic releases include PMI readings for manufacturing, services, and composite. In addition, data on bank loan growth, deposit growth, and foreign exchange reserves will be closely monitored," he added.

On the global front, Mishra noted that US macroeconomic data—including GDP growth, inflation trends, jobless claims, and PMI readings—will influence risk sentiment and currency movement. He added that geopolitical developments and updates on trade negotiations will also remain on investors’ radar.

Given the mixed domestic and global backdrop and persistent foreign fund outflows, it is essential to manage leverage and position sizes prudently. A decisive break from the prevailing consolidation range in the Nifty index would offer cues for the next directional move.

Meanwhile, he advised that participants should focus on quality large-cap and larger mid-cap stocks, particularly in sectors with stronger earnings visibility and institutional interest, such as IT, metals, and select PSU names. He further recommended that exposure to rate-sensitive sectors like realty and capital goods should remain limited.

Disclaimer: We advise investors to check with certified experts before making any investment decisions.