FPIs Sold Equities Worth ₹8,749 Crore This Week, But RBI Rate Cut Sparks Sharp Market Turnaround

Foreign portfolio investors (FPIs) offloaded Indian equities worth ₹8,749 crore this week amid global uncertainty and cautious investor sentiment ahead of the Reserve Bank of India’s (RBI) monetary policy meeting. However, the sentiment saw a sharp reversal following the RBI’s unexpected 50 basis points rate cut, which triggered a rally across Indian equity benchmarks.

FPI Selling Spree Driven by Global and Domestic Factors

Data from the National Securities Depository Limited (NSDL) indicates that FPIs were net sellers to the tune of ₹8,749 crore in the Indian equity markets between June 3 and June 6. This outflow follows a consistent trend observed over the last few weeks, as global investors weighed risk factors such as hawkish signals from the US Federal Reserve, geopolitical concerns, and weak macroeconomic indicators from China.

Rupee weakness, persistent inflation worries, and pre-policy caution also weighed heavily on foreign inflows. As of early June, the Indian rupee hovered close to the 84-mark against the US dollar, adding further pressure to FPI sentiment.

RBI’s Surprise Move Sparks a Turnaround

In a surprising move on Friday, the Reserve Bank of India slashed the repo rate by 50 basis points to 6%, deviating from the widely anticipated status quo or a marginal cut of 25 basis points. The central bank justified the move citing easing inflationary pressures and the need to support economic momentum.

The announcement triggered an immediate rally in the markets. The Sensex surged by 723 points while the Nifty 50 closed above the 24,900 mark, marking a significant rebound after four consecutive sessions of foreign-led selloffs.

“The RBI’s proactive stance to lower borrowing costs has revived market optimism. It sends a strong signal that the central bank is committed to supporting growth amidst global volatility,” said Mahesh Nandurkar, Head of Research at Jefferies India.

Sectoral Bounce and Domestic Buying

While FPIs were net sellers during the week, domestic institutional investors (DIIs) and retail participants played a vital role in absorbing the selling pressure. Banking, infrastructure, and realty stocks led the rebound post-policy announcement. Rate-sensitive sectors witnessed the biggest uptick, with Nifty Bank and Nifty Realty indices gaining 2.1% and 3.6% respectively on Friday.

“Domestic investors have become increasingly resilient. The FPI exit created an opportunity for value buying, particularly in interest-rate sensitive sectors,” noted Aditi Shah, Fund Manager at Motilal Oswal AMC.

Mid- and small-cap stocks also saw increased traction as market participants bet on higher consumer spending and corporate borrowing in the upcoming quarters.

FPIs Remain Cautious But Watchful

Despite the sudden shift in sentiment, analysts remain cautious about expecting a sustained FPI reversal in the short term. Global risk-off mood, elevated US Treasury yields, and dollar strength are expected to keep foreign investors watchful.

“While RBI’s move is definitely market-positive, FPIs are likely to wait for further data points like the US Fed policy next week and India’s upcoming Q1 earnings season before turning aggressive buyers again,” said Rajeev Mehta, Equity Strategist at YES Securities.

India’s long-term macroeconomic stability, favourable demographics, and strong corporate earnings remain attractive for global investors. However, short-term flows may continue to oscillate in response to global cues.

Market Outlook

Looking ahead, analysts expect a period of heightened volatility in the equity markets, but the medium- to long-term outlook remains constructive. The sharp rebound post-RBI policy suggests that domestic sentiment is still robust, and institutional support from Indian investors continues to underpin market stability.

“We are bullish on Indian equities for FY26 with a preference for banking, auto, and capex-driven sectors. The recent correction offers a healthy entry point,” said Vikram Desai, Chief Market Strategist at Axis Securities.

Investors are advised to maintain a balanced approach, diversifying portfolios and avoiding momentum-driven trades in the current environment. Rate-sensitive sectors, financials, and infrastructure-linked stocks could outperform in the near term due to improved policy tailwinds.