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"There are two main reasons why Foreign Portfolio Investors (FPIs) have been selling in FY2025. First, there's uncertainty about the upcoming election. FPIs generally don't like uncertainty; they prefer to play it safe and lock in the profits they made last year. Second, the market valuations are quite high.
We anticipate the market remaining volatile after June 4th. Once the election concludes, all eyes will be on the July budget announcement, triggering more speculation and potential market swings. The high market valuations could act as a barrier to significant market gains, but there's also a possibility of a downturn.
Despite the current short-term uncertainty, we maintain a positive outlook for the Indian equity market and project strong returns over the next three to five years."

 

"This shift in FPIs' behavior is not a random occurrence. It is a direct response to the ongoing geopolitical crisis in the Middle East, relative valuation discomfort, and the strength of US bond yields. These factors have prompted FPIs to swiftly withdraw funds from their portfolios, a move that significantly impacts the Indian equities market.

India VIX is not just any other metric. It is a pivotal instrument that mirrors investor sentiment and anticipated market volatility. Its inverse correlation with the Nifty is a significant aspect to ponder. Historically, surges in VIX have coincided with major market events, such as election outcomes, underscoring its relevance.

While the recent VIX surge may evoke memories of previous pre-election anxieties, its current trajectory sets it apart. The VIX behaviour during elections is comparable to other significant occurrences. It often demonstrates a trend of escalating volatility as the event draws near, indicating heightened uncertainty and apprehension among investors. This aligns with historical patterns, where the VIX rises before major events."

 

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