Indian stock market has been witnessing a sharp correction, and this has been further accelerated with foreign institutional investors (FIIs) selling their stakes. In February 2025, the asset under custody (AUC) of FIIs declined drastically to a 13-month low, which has sparked panic amongst the entire market. The FII AUC declined to Rs.62.38 lakh crore in February 2025, the lowest since January 2024. In September 2024, the AUC of FIIs peaked at Rs. 77.96 lakh crore, which has fallen by Rs. 15.58 lakh crore in February.
In January 2025, FIIs sold out stakes worth Rs. 78027 crore and in February they sold investments worth Rs. 34574 crores. In February, though the selling pressure was less compared to January, and also the second half of February witnessed lesser pressure compared to its first half, but the overall AUC went down to a 13-month low. In the first half of February, FIIs sold stakes worth Rs. 21272 crores out of the total amount mentioned above, while in the second half, it was Rs. 13302 crores.
Sector-wise analysis of FII Selloff
In February, especially in the second half, the auto sector saw a massive outflow of FII capital that amounted to Rs. 2996 crore, and FMCG sector followed it with an outflow of FII capital worth Rs. 2568 crore.
Amongst other sectors, those which also faced significant selloff include construction materials where FIIs sold stakes worth Rs. 1820 crore, followed by Financial Services losing Rs. 1647 crore, construction sector witnessing selloff of Rs. 1465 crore. Capital goods sector also saw a selloff of Rs.1258 crore. In addition, consumer durables, oil & gas and power also saw selloff worth Rs. 1241 crore, Rs. 943 crore and Rs. 1234 crore respectively,
FIIs Buying Side
While the FIIs remained net sellers in February, there was certain buying as well, which was more focused on these sectors –
- Telecom sector – FIIs bought stakes in this sector worth Rs. 5661 crores
- Chemicals – FIIs purchased around Rs. 112 crores
- Media – Rs. 34 Crore.
Navigating the challenges
While the selloff has pulled down the FII holdings, the FII ownership has risen to a 5-month high in the India market in the month of February. It has now at 16.24% up from January’s 15.98%, and this level was last seen in 2024’s September.
That said, analysts are worried because they can’t see these selling trends reversing soon. They are anticipating the oversold markets to rebound, but FIIs may not be the reason behind that. The reasons pointed out by them are like weak quarterly earnings in Q3FY25, slow economic growth, and higher valuations. FIIs are moving away from Indian markets also due to different attractive investment options, which are also risk-free, are available in the global market especially in the US.
Source: MoneyControl
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