RS 35,000 Crore Fii Selloff in August. Can GST reforms, rate lighting and a strong GDP print change the tide?

Foreign Institutional Investors (FIIs) achieved RS 34,993 CRORE from Indian shares in August, their sharpest retreat this year, because the American rates and weak income weighed on sentiment in June quarter. The outflows pushed year-to-date FII that were sold beyond RS 1.3 Lakh Crore, so that she expressed concern about the location of India in global portfolios, even if policy reforms and stronger-this expected BDP data offer potential triggers for recovery.

“This is on the back of the total FII sale worth RS 1.21.210 Crore in 2024. The simple explanation for this enormous sale is the relatively high ratings of India compared to other markets. FIIs are rotating capital to cheaper destinations,” Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Vijayakumar noted that FIIs did not completely cast out of India. “Despite the heavy sale on the secondary market, Fii’s RS bought 40,305 crore of shares via the primary market, where IPO valuations are experienced as fair.

On August 29 alone, foreign institutional investors (FIIs) extracted RS 8,312.66 Crore, while domestic institutional investors (DIIS) offered support as net buyers, with RS 11,487.64 Crore.

Financial data, it leads sectoral out in H1 August

The sale was concentrated in financial services, which saw RS 13,471 Crore in recordings in the first half of August. It followed with RS 6,380 Crore, while oil, gas and consumption fuels lost RS 4,091 Crore in the first 15 days. Power and Healthcare also saw significant outputs, which an amount of RS 2,358 Crore and RS 2,095 Crore respectively. Realty, FMCG and sustainable consumer views were each confronted with the sale of more than RS 1,000 crore.

Fii’s RS loaded 20,976 Crore in just the first two weeks of the month, which extended their retreat from July after the US President Donald Trump Markets surprised with a rate announcement of 50%. Weak income on the domestic front further compound exit pressure.

India slides into EM -Rangers

Nomura reported that “71% of EM funds are underweight India from End-Yuli (previously US 60% earlier), making India the largest underweight market in EM investors,” with the allocations of China, Hong Kong and Korea. Take advantage of the AI ​​cycle and structural reforms

GDP -surprise adds resilience

The Indian economy yielded an upward surprise in the quarter of June, with the GDP growth accelerated to 7.8% on annual-base-Nousb than the estimates of the consensus of 6.7% and higher than the 7.4% registered in the previous quarter, said Bofa Securities. The growth of the gross added value (GVA) was 7.6%, supported by strong performance in production and financial services.

Bofa added that the strong print ‘almost reduced a rate reduction in October’, although it maintained its FY26 GDP forecast at 6.5% in the midst of worldwide risks due to rates and trade disruptions.

Outlook: Reforms such as catalysts?

Jefferies said on August 13 that “FPI positioning is close to lows”, with allocations at “Decadal Lows”. The company noted that robust domestic intake offers ‘large downward protection and a sentiment amplifier’, although it warned that a rebound ‘may not maintain long’.

Motilal Oswal pointed to the Independence Day promise of Premier Modi from GST -Rationalization, the S&P rating upgrade and potential tariff lighting as possible activations to display “sentiment on the Indian stock market.”

Emkay Global called GST reforms a “growth-accretive reform of the large ticket” that could “compensate for weak growth and lukewarm income” in the short term, and possibly serve as a repeat catalyst for retreating FIIs as market confidence improves.

Read also | GST meeting, decay absenteeism and automatic sales data between 11 factors that will send D-Street this week