FIIs sell Rs 10,782 crore worth of Indian equities in September, so far. Can GST reform, GDP numbers change tide?

Synopsis

Despite Rs 10,782 crore worth of FII selling in September, Nifty has held firm for eight straight sessions. Analysts say improving macro signals, policy reforms, and potential Fed rate cuts could turn FIIs into buyers again and fuel fresh upside in equities.

Foreign Institutional Investors (FIIs) have continued to pare their exposure to Indian equities in September, offloading shares worth Rs 10,782 crore so far.

Nifty has remained unbeaten for eight successive sessions despite this sell-off. On Friday, FIIs were net buyers at Rs 129.6 crore while the domestic institutional investors (DIIs) were net buyers at Rs 1,556 crore.

Commenting on the current trends, VK Vijayakumar, Chief Investment Strategist, Geojit Investments, attributes higher valuations in India to the current FII exodus vis-a-vis other markets like China, Hong Kong and South Korea. "This has nudged FIIs to sell in India and buy in cheaper markets. This strategy has worked so far this year since these cheaper markets have hugely outperformed India in 2025 till date," he said.

In his view, FIIs may reduce their selling and may even turn buyers amid indications of a turnaround in the Indian market.

"India’s GDP growth has rebounded strongly in Q1, and the reforms - budget tax cuts, rate cuts by the MPC and GST rationalisation have the potential to sustain the growth momentum. Even though earnings growth will be modest in the 8-10% range in FY26, there is a high likelihood of above 15% earnings growth in FY27," he opined.

"The market will soon start discounting this, paving the way for a rally taking the Nifty to a new record this year itself. In such a scenario, FIIs are likely to turn buyers in India," Vijayakumar added.

Meanwhile, market regulator Securities and Exchange Board of India's (Sebi's) move to ease FPI norms is expected to give a fresh impetus. Capital markets regulator Sebi on Friday approved a single-window clearance system to make it easier for foreign investors to access Indian markets.

Also Read: Sebi eases FPIs entry into Indian markets through single-window clearance

The FII action going ahead could also hinge on the US Federal Reserve's monetary policy decision on Wednesday. There are strong expectations of a 25 bps rate cut.

Rupak De, Senior Technical Analyst at LKP Securities, said that the index has managed to stay in the green as PUT writers provided support around the 25,000 mark. In his view, the index appears to be consolidating its recent gains and gradually forming a base. "As long as it sustains above 24,850, the undertone remains constructive. A decisive move beyond 25,150 may set the stage for a rally towards 25,500 in the near term," De said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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