The foreign institutional investor (FII) selling trend may continue in India until some positive triggers for a market rally happen, analysts have said.
The sustained selling by FIIs continued for the week ending January 16. The total FII selling for January (up to 16th) stood at Rs 22,529 crore.
"This month, FIIs were sellers on all days except one. The underperformance of India vis-a-vis other major markets is continuing in early 2026 also. Year-to-date (YTD) return from Nifty stands at -1.73 per cent," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
A significant feature of the market behaviour in 2025 was that India's tepid performance last year ( Nifty return of 10 per cent) was despite the massive DII investment of Rs 7.44 lakh crore, which completely eclipsed the total FII selling of Rs 166,283 crore.
A key reason was the poor earnings growth and the consequent elevated valuations. The continuing suspense over the US-India trade agreement also impacted the sentiments, said analysts.
"The AI trade which dominated stock market trend in 2025 is continuing in early 2026 also. A reversal of this trend might happen sometime in 2026," said Vijayakumar.
Markets largely consolidated last week amid mixed cues and ended almost unchanged. After a volatile start, benchmark indices remained range-bound in the subsequent sessions.
The Nifty and Sensex finally settled at 25,694.35 and 83,570.35, respectively. Broader indices moved largely in line with the benchmarks and ended with modest gains.
"Optimism from better-than-expected Q3 earnings by select large-cap IT companies was offset by tariff-related uncertainties, geopolitical tensions, and continued foreign fund outflows," said Ajit Mishra-SVP, Research, Religare Broking Ltd.
From a flows perspective, FIIs remained net sellers, extending their recent selling trend, he added.
Next week is expected to be data-heavy and crucial for short-term market direction. Key domestic releases include PMI readings for Manufacturing, Services, and Composite. In addition, data on bank loan growth, deposit growth, and foreign exchange reserves will be closely monitored, said analysts.
