Will Easing US-Russia Tensions and S&P Rating Boost India’s FII Sentiment?
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Synopsis
As US-Russia tensions ease, a 25% tariff on India may not be implemented, potentially boosting foreign investment sentiments. With S&P upgrading India's credit rating, analysts predict a positive shift in FII activities. This comes amid mixed market performance and substantial domestic institutional buying.
Key Takeaways
- Easing US-Russia tensions may boost FII sentiments.
- S&P Global's rating upgrade enhances India's investment attractiveness.
- FIIs have sold equities worth Rs 24,190 crore.
- Domestic institutions purchased Rs 55,790 crore in equities.
- The IT sector is facing challenges while banking remains stable.
Mumbai, Aug 16 (NationPress) The recent easing of tensions between the US and Russia indicates that the anticipated 25% secondary tariff imposed on India is unlikely to take effect after August 27. Analysts expressed optimism that this development could enhance Foreign Institutional Investor (FII) sentiments.
Adding to the positive outlook for foreign investors, S&P Global has upgraded India’s credit rating from BBB- to BBB.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, commented that the forthcoming FII activities will be significantly shaped by developments on the tariff front.
Despite substantial purchases by domestic institutions, the Indian market has been underperforming for the past six weeks amid trade-related concerns and outflows from FIIs.
“India has lagged behind most markets over the last six weeks, despite significant DII buying supported by strong inflows into mutual funds,” noted Vijayakumar.
As of August 14, FIIs have offloaded equities worth Rs 24,190 crore through exchanges, but this decline has been overshadowed by massive DII purchases totaling Rs 55,790 crore.
The lackluster earnings growth, high valuations, and a modest earnings growth projection of 8% to 10% for FY26 have encouraged bearish sentiments, leading to increased short positions that impact market trends.
Analysts report that ongoing FII selling in IT stocks has caused the IT index to decline. In contrast, banking and financial sectors remain relatively stable due to favorable valuations and institutional support.
In a positive shift, Indian equities ended a six-week decline, finishing nearly 1% higher in the holiday-shortened week.
However, despite a strong start, momentum waned in later sessions due to mixed signals. Ultimately, benchmark indices rose, with the Sensex closing at 80,597.66 and the Nifty at 24,631.30.
“This rebound was backed by a positive macroeconomic environment. Retail inflation fell to 1.55% in July—the lowest rate since June 2017—due to a consistent decline in food prices,” said Ajit Mishra, SVP of Research at Religare Broking Ltd.
Wholesale inflation also remained negative at -0.58% for the second consecutive month, further supporting the view of stable prices.
Point of View
The recent developments regarding easing US-Russia tensions and India's credit rating upgrade by S&P are promising indicators for the Indian economy. With potential boosts to FII sentiments, it is imperative for stakeholders to remain vigilant and adaptable to market fluctuations. The emphasis should be on sustainable growth and investor confidence.
NationPress
19/08/2025
Frequently Asked Questions
What is the impact of US-Russia tensions on India?
Easing tensions may prevent a 25% secondary tariff on India, positively affecting foreign investment sentiments.
How has S&P's rating change affected India?
S&P's upgrade from BBB- to BBB signals increased confidence in India's economic stability, which can attract more foreign investment.
What factors are influencing FII activity in India?
FII activity is influenced by tariff developments, domestic institutional buying, and overall market sentiment.
Why is the Indian market underperforming?
The market has struggled due to trade-related concerns, tepid earnings growth, and significant outflows from FIIs.
What sectors remain resilient amidst market fluctuations?
The banking and financial sectors have shown resilience due to fair valuations and consistent institutional buying.
