Foreign Investors Extend Selling Streak into Third Week of January
Foreign portfolio investors continued their selling spree through the third week of January 2026. Market sentiment took a hit due to ongoing delays in the trade agreement between India and the United States. Additional tariff threats from US President Donald Trump further dampened investor confidence.
Trade Deal Delays and Tariff Pressures
The United States had already imposed an initial 25% tariff on India. This was followed by another 25% tariff due to India's purchases of Russian oil. Washington views these purchases as helping to fund Russia's war in Ukraine. India and the US have conducted multiple rounds of trade negotiations. However, they have not yet reached a final agreement.
This prolonged delay caused FPIs to remain net sellers in the Indian market for most of 2025. According to data from the National Securities Depository Limited, they withdrew a record ₹1.66 lakh crore last year.
Selling Continues into 2026
The FPI sell-off extended into the new year as well. NSDL data shows another ₹22,530 crore was pulled out from the Indian stock market so far this month. Domestic institutional investors provided some support during this period. They purchased local stocks worth ₹34,076 crore.
Expert Analysis on Market Trends
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, shared his insights. He stated that total FPI selling for January up to the 16th stood at ₹22,529 crores. FPIs were sellers on all days except one this month. India's underperformance compared to other major markets continues in early 2026. The year-to-date return from the Nifty 50 index stands at -1.73%.
Dr. Vijayakumar highlighted a significant market feature from 2025. India's tepid performance came despite massive DII investments. The Nifty returned only 10% last year. This occurred even as domestic institutional investors poured ₹7.44 lakh crore into the market. That investment completely eclipsed total FII selling of ₹1,66,283 crore.
He explained the principal reasons for this muted performance. Poor earnings growth and elevated valuations in India played key roles. The continuing uncertainty over the US-India trade agreement also weighed heavily on investor sentiment.
Vijayakumar further commented on future trends. The FPI selling trend may continue until positive triggers for a market rally emerge. The AI trade, which dominated stock market trends in 2025, continues in early 2026. However, a reversal of this trend might occur sometime later in the year.
Earnings Season to Guide Short-Term Direction
Mr. Ajit Mishra, SVP of Research at Religare Broking, noted the importance of the upcoming week. He expects it to be data-heavy and crucial for short-term market direction. Participants will initially react to earnings from key heavyweights. These include Reliance Industries, HDFC Bank, and ICICI Bank.
Focus will then shift to the broader set of Q3 earnings. Several large- and mid-cap companies across sectors will report their results. Key domestic releases will include PMI readings for manufacturing, services, and composite sectors. Data on bank loan growth, deposit growth, and foreign exchange reserves will be closely monitored.
Global Factors and Investor Strategy
On the global front, Mishra pointed to US macroeconomic data. GDP growth, inflation trends, jobless claims, and PMI readings will influence risk sentiment and currency movement. Geopolitical developments and updates on trade negotiations will also remain on investors' radar.
Given the mixed domestic and global backdrop, managing leverage and position sizes becomes essential. Persistent foreign fund outflows add to the caution. A decisive break from the prevailing consolidation range in the Nifty index would offer cues for the next directional move.
Mishra advised participants to focus on quality large-cap and larger mid-cap stocks. Sectors with stronger earnings visibility and institutional interest should receive attention. These include IT, metals, and select PSU names. He recommended limiting exposure to rate-sensitive sectors like realty and capital goods.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
