It seems like there is no stopping the FII selling. Despite the whopping Rs 3 lakh crore plus outflow in 5 months, foreign institutional investors continue to sell further. The question that’s on everyone’s mind is when will FII selling stop and what can bring about the return of the FIIs to India? Well, most market observers believe that a complete halt in FII selling is unlikely in March but may happen later this year. They are hoping that the tide could turn by the second half of 2025 or Q2FY25.
Four reasons that could signal return of FIIs in India
There are four key factors that can decide on the pace and extent of the slowdown in the FII selling in the near-term and possibility of reallocation of FII money in Indian markets-
Tariff impact on US economy
The deliberations about reciprocal tariff is picking pace but an equally pertinent question is how will the tariffs impact the US consumers and the US economy. Most recent studies and expert views have pointed out the risk of inflation is increasing as the the domestic prices in the US are set to see around 5-10% hike as a result of the new tariff structure announced by the Trump Government.
Market veteran Arun Kejriwal pointed out that, “All these tariffs being imposed, it means goods of common usage and consumption by the masses will become expensive in the US. Trump, with these, is going to make the common man pay more for monthly expenses. This inflation is going to hurt the US. So any rate cuts in the near future, next six months, could be ruled out.”
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The possibility of a correction bout in the US is another key deciding factor. The US Fed chose to hold rates steady in the first meeting of 2025. It also indicated that the “strong economy and renewed rise in inflation could prompt the Fed to raise rates again in 2025.” This according to most market observers is an important cue. They believe any correction in US markets could trigger allocation to EMs. “If the US economy shows any signs of a decline or challenges to growth outlook emerge as a result of these tariffs,
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