FIIs Turn Jittery as Geopolitical Tensions Sour Market Mood

With escalating tensions in West Asia and Trump's July 9 tariff deadline nearing, equity market investors are finding limited cues of hope. The dampened sentiment is quite evident as foreign institutional investors (FIIs) turned sellers (so far) this month, after consecutive buying in April and May. FIIs sold ₹4,892 crore worth of equities in the cash market through June 13, reversing their strong buying trend of ₹19,860 crore seen in May.

Last week, benchmark indices — Sensex and Nifty — ended in the red territory, falling over 1.5%. The BSE Sensex declined more than 1,300 points, or 1.66%, to close at 81,118.60. Meanwhile, the Nifty50 shed over 375 points, or 1.5%, ending below the 24,800 mark on Friday.

D-street's volatility index, Nifty Vix, surged by more than 7% on Friday as investors remained anxious. However, domestic investors continued their buying spree.

"The dominant trend in the market so far in June is the inconsistent activity of FIIs altering between buying and selling and sustained heavy buying by DIIs...In sharp contrast to the FII selling DIIs have turned sustained buyers on all days of June so far with a cumulative buy figure of ₹44,144 crores. FII selling is getting completely eclipsed by DII buying, keeping the market resilient," said VK Vijayakumar, chief investment strategist, Geojit Investments.

Geopolitical tensions between Israel and Iran have intensified, keeping global investor sentiment on edge. The ongoing exchange of direct strikes between the two nations has triggered a sharp rally in crude oil prices, with Brent crude climbing to $78 per barrel. Meanwhile, Demand for safe-haven assets also soared, with gold futures at home hitting an all-time high of ₹1,00,000.

However, more than geopolitical triggers, analysts believe that valuation concerns on D-street kept FII activity in check.

"While FIIs are concerned about the high valuations in the market,  DIIs unperturbed by valuations, are buying consistently supported by the sustained fund flows into mutual funds," said Vijayakumar.