What began as a strong rally in March is now showing signs of uncertainty. Foreign Institutional Investors (FIIs), who played a major role in driving a 6% rally in the Nifty throughout March, have sold off Rs 10,255 crore worth of Indian stocks in recent trading sessions.
The sell-off comes just before US President Donald Trump ’s highly anticipated Liberation Day tariff announcements.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, notes that while today’s tariff declaration may reduce some uncertainty around reciprocal tariffs, the unpredictability of Trump’s past decisions suggests that the uncertainty could persist well beyond today.
FIIs had turned aggressive buyers toward the end of March, likely driven by end-of-year considerations. Their buying spree triggered short-covering, which contributed to India’s outperformance. However, with the market's direction shifting, FIIs are now resuming short positions.
According to an ET report, Vijayakumar advises investors to wait for more clarity on tariffs and market trends. If the tariffs are worse than expected, there could be further sell-offs, though domestic consumption-driven sectors are expected to remain resilient in such a scenario.
What’s behind the FII sell-off ?
Jahangir Aziz from JPMorgan warns that India may not be spared from reciprocal tariffs. Even if India avoids these, sector-specific tariffs could still be a risk. He highlights two additional concerns: the potential for a global risk-off event and its impact on the dollar. If US equities suffer, history suggests that global markets, including India, will not remain unaffected.
Market expert Sunil Subramaniam views the current volatility as short-term pain with potential for medium-term gain. He believes that much of the price correction is already priced in, in anticipation of bad news. Unless there is a surprise sector-specific tariff, Subramaniam suggests that the worst may already be priced in. He recommends a staggered investment approach over the next six months, advising investors not to try to pick sectors or stocks at this moment—comparing it to “catching a falling knife.”
Opportunity amid the fear
Sudip Bandyopadhyay, Group Chairman of Inditrade Capital, acknowledges the uncertainty surrounding the markets. “The April 2 tariff announcement is creating significant psychological pressure. There’s a lot of speculation and mixed signals coming from the US It’s difficult to predict what will happen, which is why many investors are staying light ahead of the event.”
Bandyopadhyay also sees opportunity in the midst of this uncertainty. “There are several strong stocks experiencing corrections due to this unpredictability, making it a great time for building a long-term portfolio. Don’t invest all your funds today, but begin to allocate slowly. Large-cap and mid-cap stocks are trading at more attractive valuations compared to where they might be in September 2024.”
Should you be buying now?
The verdict is still out on whether the current correction is a golden opportunity or the start of further pain. According to the ET report, analysts agree that while near-term uncertainty will persist, investors with a long-term outlook can start deploying capital gradually.
Vijayakumar remains cautiously optimistic, noting that India’s economic fundamentals are still strong. While near-term volatility may be influenced by global factors, domestic demand continues to remain robust.
Bandyopadhyay echoes this sentiment, suggesting that it’s impossible to predict how the global markets or India’s markets will react once the tariffs are announced. “We’ll likely get a clearer picture when the market opens after the announcement. So while uncertainty is high, it’s still a good time to start putting money to work.”
Meanwhile, Aziz points out that India’s real challenge lies not just in tariffs, but in how global monetary policy unfolds. “If there’s a global slowdown or a risk-off event, emerging markets like India will need the ability to respond with rate cuts,” he says.
With FIIs turning net sellers once again, the direction of the market now hinges on Trump’s upcoming tariff decision. Will it be a minor setback or a major blow? Either way, investors should brace for volatility and carefully evaluate their investment strategy .
The sell-off comes just before US President Donald Trump ’s highly anticipated Liberation Day tariff announcements.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, notes that while today’s tariff declaration may reduce some uncertainty around reciprocal tariffs, the unpredictability of Trump’s past decisions suggests that the uncertainty could persist well beyond today.
FIIs had turned aggressive buyers toward the end of March, likely driven by end-of-year considerations. Their buying spree triggered short-covering, which contributed to India’s outperformance. However, with the market's direction shifting, FIIs are now resuming short positions.
According to an ET report, Vijayakumar advises investors to wait for more clarity on tariffs and market trends. If the tariffs are worse than expected, there could be further sell-offs, though domestic consumption-driven sectors are expected to remain resilient in such a scenario.
What’s behind the FII sell-off ?
Jahangir Aziz from JPMorgan warns that India may not be spared from reciprocal tariffs. Even if India avoids these, sector-specific tariffs could still be a risk. He highlights two additional concerns: the potential for a global risk-off event and its impact on the dollar. If US equities suffer, history suggests that global markets, including India, will not remain unaffected.
Market expert Sunil Subramaniam views the current volatility as short-term pain with potential for medium-term gain. He believes that much of the price correction is already priced in, in anticipation of bad news. Unless there is a surprise sector-specific tariff, Subramaniam suggests that the worst may already be priced in. He recommends a staggered investment approach over the next six months, advising investors not to try to pick sectors or stocks at this moment—comparing it to “catching a falling knife.”
Opportunity amid the fear
Sudip Bandyopadhyay, Group Chairman of Inditrade Capital, acknowledges the uncertainty surrounding the markets. “The April 2 tariff announcement is creating significant psychological pressure. There’s a lot of speculation and mixed signals coming from the US It’s difficult to predict what will happen, which is why many investors are staying light ahead of the event.”
Bandyopadhyay also sees opportunity in the midst of this uncertainty. “There are several strong stocks experiencing corrections due to this unpredictability, making it a great time for building a long-term portfolio. Don’t invest all your funds today, but begin to allocate slowly. Large-cap and mid-cap stocks are trading at more attractive valuations compared to where they might be in September 2024.”
Should you be buying now?
The verdict is still out on whether the current correction is a golden opportunity or the start of further pain. According to the ET report, analysts agree that while near-term uncertainty will persist, investors with a long-term outlook can start deploying capital gradually.
Vijayakumar remains cautiously optimistic, noting that India’s economic fundamentals are still strong. While near-term volatility may be influenced by global factors, domestic demand continues to remain robust.
Bandyopadhyay echoes this sentiment, suggesting that it’s impossible to predict how the global markets or India’s markets will react once the tariffs are announced. “We’ll likely get a clearer picture when the market opens after the announcement. So while uncertainty is high, it’s still a good time to start putting money to work.”
Meanwhile, Aziz points out that India’s real challenge lies not just in tariffs, but in how global monetary policy unfolds. “If there’s a global slowdown or a risk-off event, emerging markets like India will need the ability to respond with rate cuts,” he says.
With FIIs turning net sellers once again, the direction of the market now hinges on Trump’s upcoming tariff decision. Will it be a minor setback or a major blow? Either way, investors should brace for volatility and carefully evaluate their investment strategy .
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