FII turn net sellers of Indian equities in the first week of July: Is a market correction coming?
The sell-off comes at a time when investors are bracing for key market-moving events — notably the July 9 US-India reciprocal tariff deadline and the upcoming Q1 earnings season. Analysts believe these twin triggers will shape the future course of FII activity.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, explained, 'Two factors could revive FII interest: a positive outcome on the trade deal front and robust corporate earnings. However, any disappointment on either front may further dampen sentiment.'
Despite the recent outflows, the April–June quarter saw FIIs invest ₹38,673 crore in Indian equities, indicating strong prior conviction. Yet the recent market highs — Nifty hitting an eight-month peak on June 30 and Bank Nifty clocking a record on July 2 — have led to profit booking, particularly in sectors like capital goods and power.
FIIs have been rotating their portfolios, exiting IT and autos while increasing exposure to financials, telecom, and oil & gas, Vijayakumar noted.
Echoing the view, Trivesh D, COO at Tradejini, said, 'The profit booking seen after the rally was expected. But the intensity of daily selling is gradually reducing, hinting that selling pressure might be easing.'
So far in July, the Nifty 50 has moved just 0.2%, reflecting a consolidation phase as traders await fresh triggers. With geopolitical uncertainty and global macro pressures also in play, the market's direction this week hinges on a few key developments.
'This week is crucial,' added Trivesh. 'T for Trade Deal, T for TCS earnings, and T for Thursday — July 9 — could collectively dictate whether FIIs return or stay on the sidelines.'
Markets now await clarity — either a resolution on tariffs or a stellar Q1 report card — to drive the next move. Until then, expect caution and range-bound action.
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