Gautam Trivedi warns of more FII sell-offs in India—here's why

Gautam Trivedi, Co-Founder and Managing Partner at Nepean Capital, warns that India’s market may face additional foreign institutional investor (FII) sell-offs as earnings in the US and China start to pick up.

"In the US, the consensus earnings growth for the S&P 500 for calendar 2025 is as high as 13%. We are looking at 14-15% earnings growth (for India) for FY26. So, we have competition from the US. And don't forget China, where the consensus earnings growth is also 12-13%," he noted.

Also Read: Asian Paints shares plunge after downgrades, target cuts

Trivedi explained that the recent sell-off in India began when China surprised markets with a push to revive its economy, offering a fresh alternative to investors within the emerging market space.

As of late September, foreign investors held about $1 trillion in India’s market, around 17% of its total market cap of $5.7 trillion. They have already sold $13 billion, or 1.3% of their holdings, and Trivedi believes they could offload more, potentially increasing this to 2.5% if the current trend continues.

The Indian market, which had been a buy on every dip until September, has corrected nearly 8% from its September peak.

This is a healthy reset for a market that has been driven more by fund flows than by fundamentals in recent months. “The reality has set in,” he said.

Also Read: Chetan Ahya on why Trump tariffs may have little impact 

Trivedi highlighted the steady decline in growth metrics over recent years, with sales, earnings before interest, tax, depreciation, and amortisation (EBITDA), and profit after tax (PAT) growth rates dropping significantly since 2021-22 (FY22).

"If you look at quarterly results within the last three years, starting from the Q2FY22 to the current quarter FY25, sales growth from Q2FY22 has fallen from 25.7% to 7.6%. EBITDA growth has fallen from 12.9% to 1.2%. and PAT growth has fallen from 38.6% to a negative 5.3%," he said.

Despite these challenges, Trivedi is optimistic about the resilience of India’s equity market, driven largely by domestic retail participation.

Strong client additions and rising traded volumes signal continued retail investor interest. “This market is not going to be driven by earnings or FII flows but by the rapid financialisation of India’s equity markets,” he said.