Equity

India’s equity mutual fund industry witnessed a recovery in investor inflows during February, signaling renewed confidence in the country’s equity markets. According to data released by the Association of Mutual Funds in India, net investments into equity schemes rose to approximately Rs. 25,977 crore, reflecting a modest increase compared with January. The inflows were largely driven by sustained participation in diversified categories such as flexi-cap, mid-cap and small-cap funds.

Indian stock markets came under intense pressure after reports of a proposed increase in the Securities Transaction Tax unsettled investor confidence. The Sensex and Nifty registered steep declines as higher trading costs raised concerns about liquidity, derivatives activity, and near-term market participation. The selloff was broad-based, reflecting policy-driven anxiety rather than company-specific weaknesses. Traders moved quickly to cut risk, while institutional investors adopted a cautious stance pending clarity from policymakers.

The State Bank of India (SBI) Chairman has called for taxation parity between bank deposits and equity investments, highlighting a structural imbalance that discourages long-term investment in equities. Speaking at a financial forum, he emphasized that disproportionate taxation on fixed deposits compared to capital gains from equities has created suboptimal investment behavior, leading to lower market participation and savings inefficiency.

Indian equity benchmarks closed sharply lower as the Sensex and Nifty declined under the combined weight of sustained foreign institutional investor (FII) outflows and mounting global trade concerns. Investor sentiment weakened amid uncertainty over global economic growth, volatile currency movements, and shifting trade policies in major economies. Heavy selling in banking, information technology, and export-oriented stocks amplified the downturn, while defensive sectors offered limited support.

India’s primary equity market is set for a strong rebound this year, with total initial public offering (IPO) fundraising projected to surge by 32 percent to nearly Rs. 2.5 lakh crore, according to estimates by Kotak. The forecast reflects improving investor sentiment, a healthier pipeline of companies ready to list and sustained interest from domestic and global capital. As equity markets stabilize and corporate earnings show resilience, issuers are increasingly confident about tapping public markets.

Foreign portfolio investors (FPIs) withdrew Rs. 7,608 crore from Indian equities in January, signaling a cautious shift in global investor sentiment. The outflows reflect a combination of elevated valuations, global interest rate uncertainty and renewed attractiveness of developed market assets. While India’s long-term growth fundamentals remain intact, short-term capital flows have been influenced by macroeconomic data, currency movements and evolving expectations around monetary policy.

India’s stock market is navigating a period of heightened uncertainty as macroeconomic indicators and foreign institutional investor (FII) activity exert growing influence on market direction. Inflation trends, interest rate expectations, currency movements and global growth concerns are increasingly dictating investor sentiment. At the same time, fluctuating FII flows are amplifying volatility across large-cap and rate-sensitive stocks.

India’s equity markets are witnessing an unprecedented withdrawal of foreign portfolio investment in 2025, marking one of the sharpest capital outflows in recent history. Rising global interest rates, elevated geopolitical risks and concerns over stretched valuations have prompted overseas investors to reassess exposure to emerging markets, including India. Despite resilient domestic fundamentals, foreign portfolio investors (FPIs) have pulled out significant capital, triggering market volatility and sector-specific corrections.

Life Insurance Corporation of India (LIC) continues to play a pivotal role in India’s equity markets, with sustained investments across flagship business houses such as the Tata Group, Reliance Group and Adani Group. The state-owned insurer’s holdings reflect a calibrated strategy focused on long-term value creation, sectoral leadership and balance-sheet strength. Market observers say LIC’s investment approach combines stability with selective risk-taking, positioning it as both a financial anchor and a strategic institutional investor.

India’s market regulator, the Securities and Exchange Board of India (SEBI), has initiated a comprehensive review of position limits in the equity derivatives segment to strengthen risk management and curb excessive speculative exposure. The proposal aims to align exposure calculations with actual market sensitivity rather than notional values, ensuring that position limits reflect real, measurable risk. SEBI intends to refine both trading-member and client-level thresholds, enhance intraday monitoring, and recalibrate market-wide limits for stock-specific contracts.