FPIs extend selling streak to fifth straight session, pull out ₹13,500 crore from Indian equities
After three months of sustained buying, overseas investors resumed their selling spree in July amid a lack of clarity surrounding the India–US trade deal, stretched valuations, and a tepid start to the June quarter earnings, prompting them to stay away from local equities and look instead at other Asian markets where valuations appear more attractive compared to India.
In addition, the strengthening US dollar and elevated US bond yields are adding to the pressure on Indian equities. The US benchmark has surged 28% from its April lows as investors grew optimistic that President Donald Trump's tariff war won't hurt the economy and corporate earnings as initially feared.
Meanwhile, the latest strong jobs data weakened expectations for imminent cuts by the Fed ahead of the central bank's meeting next week and is also supporting a strong US dollar.
FPIs have been net sellers in 12 out of 19 trading sessions in July. However, the impact on Indian stock market has been limited, thanks to robust buying from domestic institutional investors (DIIs), largely driven by mutual funds, who have continued to absorb the heavy FPI selling.
According to exchange data, DIIs have purchased ₹ 37,687 crore worth of Indian equities in July so far, more than offsetting the FPI outflows. DIIs have remained net buyers since August 2023, and their total investments are on track to cross the ₹ 4 lakh crore mark in just seven months of 2025.
Despite starting 2025 on a negative note, with FPIs remaining net sellers for the first three months, sentiment reversed in April and stayed positive in the following two months. During this period, FPIs cumulatively purchased over ₹ 31,000 crore worth of equities, helping frontline indices touch new near-term highs.
However, the sharp rally in the Indian stock market has once again raised valuation concerns. A weak start to the June quarter earnings season, particularly in the IT sector and select banking names, has further fueled expectations of a subdued quarter for India Inc.
So far, only half of the 12 Nifty companies that have reported first-quarter results have managed to beat analyst estimates, according to Bloomberg. This is significantly lower than the previous quarter, when over 58% had surpassed expectations at the same point in the results season.
Analysts believe that a turnaround in FPI sentiment hinges on improved earnings visibility and clarity on the India–US trade deal. A favorable resolution, they say, could bolster the outlook for export-oriented sectors and enhance India's relative appeal among emerging markets.
Meanwhile, the continued moderation in inflation has strengthened expectations of a potential rate cut. If realized, this could further support market sentiment.
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Substance vs form: All eyes now on Tiger Global case after SC's verdict on global hospitality leader Hyatt International
Mumbai: After the Supreme Court verdict last week on the global hospitality leader Hyatt International, all eyes are on the high-stake Tiger Global case , whose outcome, expected in August, could sway the fortunes of many foreign investors and force them to change the way they run their shops to bet on India. But, can the Hyatt ruling have a rub-off on the verdict on Tiger? With the same bench of judges that ruled on Hyatt to decide on Tiger-the question has cropped up among legal eagles, tax experts, and MNCs as the battle between Tiger, an offshore investor, and India's tax office nears a closure. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villas For Sale in Dubai Might Surprise You Dubai villas | search ads Get Deals Undo The question stems from the court's observation that "legal form does not override economic substance". This single observation, according to several practitioners, may link the two cases, even though they pertain to different issues. THE COMMON LINK Live Events The Hyatt feud was over whether the foreign firm, acting as a consultant to an Indian hotel group, had a ' permanent establishment ' (PE) in India. The court-while observing that "legal form does not override economic substance" -said it did as Hyatt was not a typical consultant but was deeply involved in running the hotel in India, thanks to the terms of the deal. A 'PE' status means the foreign party would pay tax here on the portion of its global earnings attributable to India - and not just the tax deducted from its fees. The Tiger case, on the other hand, relates to 'capital gains' on sale of stocks - whether a Mauritius entity could escape tax in India merely on the back of the ' tax residency certificate ' (TRC) it obtained from the Mauritian authorities under the treaty the country has with India. Here is how the 'substance versus form' argument comes up: is TRC, a piece of paper, good enough to avoid tax by a shell entity which has no office, hires few or no employees, and has no power to make decisions? While the TRC gives it 'legal form', in reality, it may just be a paper outfit lacking 'substance'. "The Hon'ble SC regarded utmost importance to 'substance over form principle' and in doing so did a deep dive into the documents to ascertain 'control of operations', actual activities of employees and commercial agreements (like revenue linked service fees) in the Hyatt International matter. Substance over form , control and management and commercial substance are important factors that take centre stage even in treaty eligibility cases and a ruling in the case of Tiger Global is expected soon," said Ashish Mehta, partner at the law firm Khaitan & Co. 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"Considering the greater scrutiny faced nowadays, it is essential to understand that the degree of reliability assigned to TRC is that of sufficient evidence rather than an irrebuttable evidence. It is sufficient, to begin with, but neither sacrosanct nor infallible!," said Karundia. The tax office had questioned Tiger Global's stand of not paying tax when it sold shares of Flipkart Singapore (holding shares of an Indian company) to another foreign investor (linked to Walmart) on the grounds that Tiger's Mauritius arm (the actual seller owning the Singapore entity) was only a vehicle used to avoid tax. Agreeing on the possibility of the court putting matters under the 'substance' lens, Rahul Garg, managing partner of Asire Consulting, which advises MNCs on tax, finance, assurance, and regulatory matters, said, "The court examined the commercial and operational realities to evaluate the degree of control and supervision by the foreign entity. It reiterated that legal form does not override economic substance. Since it's a fundamental requirement that tax treaties need to be availed in good faith, these observations could further support the Revenue's case if it can prove that the parent was an active participant with significant control and supervision in the decision making on investments by the entity which recorded the capital gains." It isn't the first time the court held substance over form. But that it chose to give a subtle reminder in the Hyatt ruling is lending itself to interpretation.
