Foreign institutional investors (FIIs) continued their selling spree on January 13, offloading ₹1,500.00 crore worth of Indian equities, while domestic institutional investors (DIIs) provided crucial support by net purchasing ₹1,182.00 crore worth of shares. The contrasting investor behavior highlighted the divergent sentiment between foreign and domestic market participants as Indian equity markets ended marginally lower.

Market Performance Overview

The benchmark indices closed in negative territory, with mixed performance across different market segments. The Sensex declined 250.48 points or 0.30% to close at 83,627.69, while the Nifty fell 57.95 points or 0.22% to end at 25,732.30.

Institutional Investment Flows

The detailed breakdown of institutional trading activity revealed significant volumes on both sides. DIIs demonstrated strong buying interest by purchasing shares worth ₹15,445.00 crore while selling ₹14,263.00 crore worth of equities. In contrast, FIIs bought shares worth ₹13,495.00 crore but sold a larger quantum totaling ₹14,995.00 crore.

Year-to-Date Investment Trends

The year-to-date figures reflect a clear pattern of foreign selling and domestic buying. FIIs have been net sellers worth ₹16,921.00 crore since the beginning of the year, while DIIs have provided substantial support through net purchases of ₹24,923.00 crore.

Expert Market Analysis

Ajit Mishra from Religare Broking noted that markets remained volatile on the weekly expiry day, ending marginally lower amid mixed global cues. The market action reflected the interplay between earnings-related reactions and global uncertainty, with early optimism supported by encouraging IT earnings and progress in India-U.S. trade discussions.

However, the lack of follow-through and fresh selling in heavyweights across sectors limited the upside potential. Ongoing geopolitical and global trade concerns continued to weigh on risk appetite, keeping trading largely stock-specific.

Technical Outlook and Recommendations

Market experts maintain a cautious stance on the Nifty, suggesting a sell-on-rise approach until the index decisively reclaims the 26,000 level. A decisive breach of the medium-term 100-day EMA, placed near 25,600, could accelerate the decline toward the 25,400 zone. Given the earnings season and fluctuating global cues, experts recommend staying light and waiting for clearer confirmation of the next directional move while focusing on stock-specific opportunities with a hedged approach.

Foreign Portfolio Investors (FPIs) have started 2026 on a cautious note, withdrawing ₹7,608 crore from Indian equities in the first two trading sessions of January. This extends the selling streak from 2025, which witnessed a record outflow of ₹1.66 lakh crore, marking the largest withdrawal since FPIs began investing in India.

Record 2025 Selling Spree and Early 2026 Trends

The year 2025 witnessed unprecedented FPI exodus from Indian markets, with foreign investors selling equities worth ₹2.40 lakh crore through secondary markets. Their primary market investments of ₹73,909 crore provided only partial relief, resulting in net outflows of ₹1.66 lakh crore. The withdrawal was triggered by volatile currency movements, global trade tensions, concerns over potential US tariffs, and stretched market valuations.

"The year 2025 closed with record FII selling in India. This is the worst selling by FIIs since they started investing in India," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.

Market Impact and Currency Depreciation

The sustained FPI selling pressure significantly contributed to the rupee's nearly 5.00% depreciation against the US dollar during 2025, making it the worst-performing major currency. The selling pattern varied across quarters in 2025:

Vijayakumar attributed the massive selling to "relatively elevated valuations in India and the 'AI trade' as principal factors that pushed the FIIs to sell mode."

Historical January Patterns and Current Outlook

According to Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, FPIs have historically remained guarded in January, having withdrawn funds in eight out of the past ten years. This trend is not unusual, as foreign investors typically adopt a cautious approach at the beginning of the year.

Khan noted that equity valuations have become relatively comforting compared to last year, which could further support a revival in inflows. "While high valuations were a key concern over the past year, that pressure appears to have eased for now, offering some room for optimism going ahead," he added.

Expert Predictions for 2026 Reversal

Despite the challenging start, market experts express optimism for a trend reversal in 2026. Vijayakumar believes the year is likely to witness a shift in FPI strategy, as improving domestic fundamentals may start attracting net foreign inflows. "Significant improvement in India's fundamentals are likely to attract net FII inflows in 2026," he said, citing robust GDP growth and prospects of improvement in corporate earnings.

Khan echoed similar views, stating that normalisation in India-US trade relations, a benign global interest rate environment, and stability in the USD-INR pair could create a favourable backdrop for foreign investors. However, he cautioned that FPI flows are likely to remain highly sensitive to global cues and macroeconomic developments.