Relief rally sparks hope, but FPIs say Indian equities still lack the catalyst for a durable turnaround<\/p>\n
Indian equities may have snapped their three-day losing streak with a modest rebound on Thursday, but foreign portfolio investors (FPIs) are not convinced that the worst is over. Despite improving valuations and supportive global headlines, overseas investors say stronger domestic triggers are still missing for a sustained market revival.<\/p>\n
At 11:32 am on Thursday, the Nifty was trading about 0.2 percent higher, breaking a losing streak. Yet the broader picture remains fragile: the benchmark index is down 4.5 percent till January 21, while more than half the stocks in the BSE Smallcap index have corrected over 10 percent. For FPIs, that divergence tells a deeper story about confidence \u2014 or the lack of it.<\/p>\n
The relief rally was partly triggered by softer global commentary after US President Donald Trump backtracked on proposed EU tariffs, softened his stance on Greenland, and hinted at a \u201cgood trade deal\u201d with India. But fund managers say such episodic optimism does not resolve the structural uncertainty surrounding global trade.<\/p>\n
Rashi Talwar Bhatia of Ashmore explained that the concern around a potential India\u2013US trade deal goes beyond direct export exposure.<\/p>\n
\n\u201cThe deal is not relevant anymore. The first derivative impact is minimal \u2014 about 2% of exports go to the US. But the worry is the second derivative impact,\u201d she said, referring to the risk of Chinese goods being diverted into European markets and disrupting global trade flows.<\/p>\n<\/blockquote>\n
She added that unpredictability itself has become the bigger risk.<\/p>\n
\n\u201cThe Greenland issues, for example, came out of the blue. There is just too much unpredictability,\u201d Bhatia said.<\/p>\n<\/blockquote>\n
Hiren Dasani, Chief Investment Officer (Emerging Markets) at WhiteOak Capital, echoed similar concerns.<\/p>\n
\n\u201cWith each passing day of delay in US\u2013India trade deal, market is trying to factor in long-term implications of higher tariff,\u201d he said, adding that any genuinely positive breakthrough could still shift sentiment quickly.<\/p>\n<\/blockquote>\n
Also Read : Silver ETFs Jump Up to 15% on Value Buying \u2014 Should You Enter Now or Wait?<\/a><\/p>\n
Currency volatility remains a key overhang for foreign flows<\/h2>\n
Beyond geopolitics, rupee volatility is emerging as a critical factor shaping foreign investor behaviour. FPIs measure returns in dollar terms, and currency instability directly raises the hurdle rate for fresh allocations.<\/p>\n
Bhatia explained that the rupee\u2019s weakness reflects both structural and cyclical factors.<\/p>\n
\n\u201cThe rupee should depreciate 3\u20134% every year against the dollar, based on the inflation differential. What happens in reality is that this depreciation does not happen linearly, so during volatility we see sharper corrections,\u201d she said.
\u201cRight now, we are in oversold territory. It will retrace back.\u201d<\/p>\n<\/blockquote>\nDasani was more cautious on near-term flows.<\/p>\n
\n\u201cRupee is a key factor that is worrisome for foreign investors because they care only about dollar returns. It raises the hurdle for investors to commit. Till the rupee stabilises, they will remain cautious,\u201d he said.<\/p>\n<\/blockquote>\n
For equity investors, this means FPI inflows may remain intermittent, even if domestic valuations appear reasonable.<\/p>\n
Earnings momentum is mixed and no longer a strong support<\/h2>\n
Another area of concern for global funds is the lack of strong earnings acceleration. While some pockets have shown resilience, India\u2019s corporate growth narrative is no longer clearly outperforming global peers.<\/p>\n
Bhatia believes domestic growth remains the decisive factor.<\/p>\n
\n\u201cEither geopolitics will settle or markets will become immune to it. Domestic growth has to be strong; that\u2019s the main thing for our markets,\u201d she said.<\/p>\n<\/blockquote>\n
She did acknowledge selective positives:<\/p>\n
\n
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IT companies have delivered better-than-feared results<\/p>\n<\/li>\n
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Banks are seeing healthier credit growth<\/p>\n<\/li>\n
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Valuations in several sectors now look more reasonable<\/p>\n<\/li>\n<\/ul>\n
\n\u201cResults are slightly better, but stocks are still down, which makes valuations more palatable,\u201d she noted.<\/p>\n<\/blockquote>\n
Dasani, however, pointed out that other global markets are benefiting from stronger structural themes.<\/p>\n
\n\u201cOther markets have been growing faster on the strength of AI, semiconductors, defence and so on,\u201d he said, suggesting India currently lacks a comparable earnings super-cycle.<\/p>\n<\/blockquote>\n
Here\u2019s what happened today and why traders reacted<\/h2>\n
Thursday\u2019s rebound was driven more by sentiment relief than fresh conviction. Traders responded to:<\/p>\n
\n
- \n
Trump\u2019s softer tone on tariffs and Greenland<\/p>\n<\/li>\n
- \n
Short covering after three sessions of selling<\/p>\n<\/li>\n
- \n
Valuation comfort in select large-cap names<\/p>\n<\/li>\n<\/ul>\n
But the limited upside and continued weakness in broader markets show that institutional investors are still cautious. The rally reflected tactical positioning rather than long-term accumulation.<\/p>\n
Valuations have cooled, but FPIs say they are still not compelling<\/h2>\n
The recent correction has eased valuation pressure, especially in midcaps and smallcaps. Yet FPIs argue that prices are now in a \u201cneutral zone\u201d, not yet cheap enough to trigger aggressive buying.<\/p>\n
Bhatia was blunt about earlier excesses.<\/p>\n
\n\u201cThere was no reason why there was so much strength in the markets,\u201d she said, adding that the ongoing correction is healthy.
\u201cSpeculative hands are getting pushed out of the market, which is actually good.\u201d<\/p>\n<\/blockquote>\nDasani offered a valuation framework investors should note:<\/p>\n
\n\u201cCurrently valuations are in line with long-term average multiples of the last 10 years. It\u2019s a neutral zone. Unless valuations become compelling, there is no urgency to buy India now.\u201d<\/p>\n<\/blockquote>\n
For investors, this suggests the market may stabilise before it truly rallies, rather than bounce sharply.<\/p>\n
What could change the narrative for Indian markets<\/h2>\n
Both fund managers agree that a durable rally will require a narrative shift, not just incremental news flow.<\/p>\n
Dasani outlined potential triggers:<\/p>\n
\n
- \n
A genuinely favourable India\u2013US trade deal<\/p>\n<\/li>\n
- \n
Positive surprises in the Union Budget<\/p>\n<\/li>\n
- \n
Structural reforms such as ease of doing business<\/p>\n<\/li>\n
- \n
Expansion of production-linked incentive (PLI) schemes<\/p>\n<\/li>\n<\/ul>\n
\n\u201cSomething has to change, possibly surprise announcements in the Budget or a truly favourable trade deal,\u201d he said.<\/p>\n<\/blockquote>\n
He also stressed that fiscal discipline remains crucial for currency stability and investor confidence, suggesting that markets will reward structural reforms over short-term stimulus.<\/p>\n
What this means for investors and portfolios<\/h2>\n
The message from FPIs is clear: the worst panic may be over, but conviction has not returned.<\/p>\n
For investors, this implies:<\/p>\n
\n
- \n
Avoid aggressive lump-sum buying based only on short-term rallies<\/p>\n<\/li>\n
- \n
Focus on quality businesses with visible earnings strength<\/p>\n<\/li>\n
- \n
Expect volatility to continue as global cues remain fluid<\/p>\n<\/li>\n
- \n
Use corrections for staggered accumulation rather than chasing momentum<\/p>\n<\/li>\n<\/ul>\n
The current phase appears to be one of transition rather than trend, where patience and selectivity matter more than speed.<\/p>\n
\n
- Nifty 50<\/a><\/li>\n
- Bank Nifty<\/a><\/li>\n
- Sensex<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"
Relief rally sparks hope, but FPIs say Indian equities still lack the catalyst for a durable turnaround Indian equities may have snapped their three-day losing streak with a modest rebound on Thursday, but foreign portfolio investors (FPIs) are not convinced that the worst is over. Despite improving valuations and supportive global headlines, overseas investors say […]<\/p>\n","protected":false},"author":4,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[615],"tags":[],"ppma_author":[1331],"class_list":{"0":"post-19969","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-stock-market-news"}," _eael_post_view_count":0,"authors":[{"term_id":1331,"user_id":4,"is_guest":0,"slug":"sourabh","display_name":"Sourabh Sharma","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=19969"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19969\/revisions"}],"predecessor-version":[{"id":19979,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/19969\/revisions\/19979"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/19978"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=19969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=19969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=19969"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=19969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}