Relentless selling by foreign institutional investors (FIIs) has continued to weigh on Indian equity markets, with the Sensex and Nifty registering losses for the eighth consecutive session on Friday, 14 February.

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The BSE Sensex closed 199.76 points lower at 75,939.21 after an intraday drop of nearly 700 points, while the NSE Nifty declined 102.15 points to settle at 22,929.25. Over the past eight sessions, the Sensex has fallen by 2,644.6 points (3.36 per cent), and the Nifty has lost 810 points (3.41 per cent).

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Amid this downturn, Rajat Sharma, founder of Sana Securities, explained how currency fluctuations and taxation significantly impact FII returns, making Indian markets less attractive. Using an example, Sharma illustrated that if an investor converts $1 to Indian rupees at an exchange rate of Rs 84 per dollar and earns a 10 per cent profit, the investment grows to Rs 92.4.

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However, after deducting long-term capital gains tax of Rs 1.05, the amount reduces to Rs 91.35. If the exchange rate changes to Rs 88 per dollar at the time of conversion back to USD, the investor receives only $1.04, effectively turning a 10 per cent gain into a mere 4 per cent return.

Market Sentiment

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Market sentiment remains weak, with major laggards on Friday including Adani Ports, UltraTech Cement, Sun Pharma and Tata Steel. In contrast, Nestle, Infosys, and HCL Tech were among the few gainers. Analysts believe that corporate earnings, especially in mid- and small-cap segments, have fallen short of expectations, adding to investor caution. 

Vinod Nair, Head of Research at Geojit Financial Services, stated that external factors such as tariff concerns, rupee depreciation, and weak earnings trends are further contributing to market volatility. He added that uncertainty will persist until there is clarity on trade policies and a recovery in corporate earnings.

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Selling Continues

According to exchange data, FIIs offloaded equities worth Rs 2,789.91 crore on Thursday. Analysts suggest that ongoing discussions between India and the United States over a proposed trade agreement may also be influencing foreign investors’ cautious approach. Meanwhile, India and the US have pledged to double bilateral trade to $500 billion by 2030, with plans to negotiate a multi-sector trade agreement by late 2025 to improve market access and reduce duties.