Positive US-India Trade Deal and Earnings Growth to Boost FII Investments
Positive developments on the US-India trade deal and a pick-up in earnings growth will lead foreign institutional investors (FIIs) to buy in India, boosting investor sentiment, analysts said on Sunday. FII investments have started in early 2026, continuing the trend of the previous year.
In 2025, FIIs made net sales of equities worth Rs 166,283 crore, which impacted the performance of the Indian market and also weakened the rupee by about 5 per cent. At the beginning of 2026, the expectation was that FIIs will turn buyers on improvement in GDP growth and corporate earnings, said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
However, geopolitical developments took a turn for the worse with the US intervention in Venezuela and the absence of positive developments on the trade talks. Some negative comments from the US commerce secretary gave the impression that the trade agreement will be further delayed. This impacted market sentiments, and FIIs continued selling by increasing the selling volume in the last two trading days. Total FII (cash market) selling till January 9 stood at Rs 11,784 crore.
Market sentiments have weakened, leading to Nifty falling 618 points in the week ended January 9, despite DII buying of Rs 17,900 crore till the week of January 9. Last week's sell-off was broad-based, with cyclical and policy-sensitive sectors suffering the most. Energy, metal, and real estate stocks fell sharply on concerns over global trade disruptions, uncertainty in commodity demand, and risk aversion.
Banking stocks also declined amid a cautious market and continued FII selling, with Bank Nifty underperforming the broader market, said Ajit Mishra, Senior Vice President, Research, Religare Broking Ltd. In the current environment of heightened volatility and global uncertainty, a cautious and disciplined approach is advisable.
While bargain hunting could lead to intermittent rebounds after the sharp correction, sustained upside is likely to remain capped until greater clarity emerges on earnings, global trade developments, and FII flows, according to Mishra.
