Indian equity markets navigated another volatile session on January 21 as foreign portfolio investors (FPIs) remained net sellers, extending a trend that has weighed on sentiment since the start of the year. According to provisional exchange data reported by foreign investors net sold Indian equities worth ₹1,788 crore during the session, while domestic institutional investors (DIIs) stepped in with net purchases of ₹4,520 crore.

The flow data once again highlighted a clear divergence in investor behaviour. FPIs bought shares worth ₹15,371 crore but sold equities amounting to ₹17,159 crore, resulting in a net outflow. In contrast, DIIs purchased shares worth ₹17,387 crore and sold ₹12,867 crore, reinforcing their role as the primary counterbalance to foreign selling pressure.

This pattern is not limited to a single session. On a year-to-date basis, FPIs have already turned net sellers to the tune of ₹21,702 crore, while DIIs have net bought equities worth ₹30,140 crore. The numbers underscore a structural shift in market dynamics, where domestic savings routed through mutual funds, insurance companies and pension funds are increasingly absorbing global risk-off flows.

Market performance reflected this tug of war. Benchmark indices extended losses for a third consecutive session, with the Nifty briefly slipping below the psychologically important 25,000 level during intraday trade. However, sustained buying at lower levels helped the index recover more than 237 points from the day’s low, eventually closing at 25,157, down 0.3 percent.

Broader markets bore the brunt of risk aversion. The Nifty Midcap 100 declined 1.1 percent, while the Nifty Smallcap 100 fell 1 percent, pointing to continued caution in higher-beta segments. Sectoral performance was largely negative, with only Oil and Gas and Metals managing to close in the green. Consumer Durables extended their losing streak, falling 1.6 percent for the ninth consecutive session, while PSU stocks and Realty also ended notably lower.

Commenting on the session, Siddhartha Khemka, Head of Research for Wealth Management at Motilal Oswal Financial Services, said sentiment remained under pressure due to a mix of global uncertainties, geopolitical tensions between the US and Europe, and an uneven earnings backdrop. He also pointed to persistent FPI selling as a key overhang for the market.

Currency weakness added another layer of caution. The Indian rupee slipped to a record low of 91.19 against the US dollar during the session, amplifying concerns around imported inflation, foreign fund flows, and external stability. Historically, periods of sustained rupee depreciation tend to coincide with heightened volatility in equity markets, particularly in sectors dependent on imported inputs.

Looking ahead, global cues are expected to remain in focus. Markets are closely watching developments around US President Donald Trump’s appearance at the World Economic Forum in Davos, especially following recent tensions with European allies. Any escalation in geopolitical rhetoric or policy signals could influence risk appetite across emerging markets, including India.

Domestically, stock-specific action is likely to dominate near-term trading as several companies report their quarterly earnings. Results from InterGlobe Aviation, DLF, Indian Bank, Coforge, APL Apollo Tubes, Mphasis and Radico Khaitan are expected to drive individual stock moves, even as the broader index remains range-bound.

Persistent FPI outflows continue to cap upside in headline indices, but strong domestic participation is preventing disorderly declines. This divergence suggests that while valuations may see periodic pressure, systemic stability remains intact.

Rate-sensitive and consumption-driven sectors such as Consumer Durables and Realty remain vulnerable amid weak sentiment and currency pressures. Export-oriented sectors like Metals and select IT names could find relative support from a weaker rupee, subject to earnings commentary.