Trump’s victory and pace-packed foreign institutional investors (FII) departures seem to have shook Indian stock markets and have been made faster by his muscle trade policy.
The Indian benchmark index was closed low for the fifth straight session on Tuesday, with Sensex over 1,000 points and the NIFTY50 below 23,100. The market capitalization of companies registered on BSE has shrunk at Rs 9.3, down to Rs 408.52.
“The ongoing uncertainty surrounding US trade policy and tariffs, coupled with domestic economic growth concerns and sustained sales through FII, is undermining market sentiment,” says Geojit Financial Services Director of Research Vinod Nair said.
“America First” Speed-Up Will the “India” move move with FII?
Trump’s tariffs are the major cause of the huge dip in the Indian stock market. Trump’s first US policy said it drove the FII, who had already escaped from India, due to a variety of other reasons, including strengthening the dollar, US bond yields, overvaluing Indian equities, and weak income. It is being done.
With the Trump administration launching a new “America First” initiative, Kotak Mutual Fund Nireshusher says the “QUIT Emerging Markets” movement is taking place in the FII world. What you asked me to bring $100 billion, here I obviously bring $500 billion, America’s first policy and high bond yields are pushing capital back into America,” Shah said. I did. Maintain volatility over the medium term based on geopolitical risks and FII outflows. With Trump’s tantrums in full swing, the FII has not paid attention to positive domestic clues, at least for now. They largely ignored the Finance Minister Nirmala Sitharaman’s Rs 1 lakh consumption, budget income tax, tax cuts by the RBI in five years, and the election results in Delhi.
FII has sold $9.94 billion worth of Indian stock so far this year, according to NSDL data. “The spills are part of a wider EM (emerging market) sale, but India is in the worst impact at 0.2% of its market capitalization in the past month. However, more spills in the coming months will be is expected. Of the 12-month market capitalization in India, other EMSs are 0.5-1.3%.
In the first 30 trading sessions of 2025, the FII ‘Ghar Wapsi’ campaign, or the flight of global capital back to homeland of the United States, has already resulted in a $10 billion outflow from Dalal Street this year.
India’s strategy for Trump’s tantrums
From February 12th to meet Trump, Prime Minister Modi will be able to keep him out of Trump’s fire during a two-day visit to the US, where Indian Prime Minister can lock him out of Trump’s fire. There is a possibility of some kind of mutual understanding regarding customs duties.
India is considering tariff cuts in at least 12 sectors, including electronic, medical and surgical equipment, along with some chemicals, to increase US exports. Those cuts are consistent with New Delhi’s domestic production plan, government officials told Reuters. The official, who spoke on condition of anonymity, said concessions are being considered for items that India sources primarily from the US or that could potentially buy more, such as dish antennas and wood pulp. Ta. Modi is expected to discuss tariffs with Trump next week, and India is open to discussing the possibility of a mini trade deal. The early visit hopes to avoid “a situation like the trade war happening between us and China,” a third official said.
The discussion on tariff concessions follows the reduction in the average import tariff rate in India, with taxes on luxury bicycles and luxury cars from 13% to 11% of several items in the annual budget. India is also reviewing additional fees collected for over 30 items, including luxury cars and solar cells.
Understanding trade between the two countries can prevent tariff damage to the US’s Indian economy, but the FII “end India” movement is part of the larger “Quit Emerging Markets” theme, and the FII outflow reversal We cannot guarantee that Due to Trump’s first American policy and other factors such as the strong dollar and US bond yields. In such a scenario, market experts say that they should follow the asset allocation dharma by diversifying other assets such as gold, silver and liabilities.
For example, gold ETFs have given more than 9% returns over the past month. When it comes to stock purchases, bottom-up strategies are more likely to work, not basket purchases. With peekish trading on a year-old PE, 20 times the average of 7% off the last five years, it’s not too valuation to leave Largecap stocks. “Given the index and the fact that a significant amount of revisions have occurred in the broader market, this is the time to start new investments from a medium-term, long-term perspective.”
(Includes input from the agent)
