This historic milestone contrasts with the underperformance of the Nifty 50, which is 10% below its peak. Despite strong SIP inflows, the benchmark index has struggled due to continued foreign outflows, higher valuations and global uncertainty, creating a gap between domestic retail optimism and broader market sentiment.
Market expert Sandeep Sabharwal attributes this to the cautious approach of FIIs and the diversion of domestic funds towards Initial Public Offerings (IPO) and Qualified Institutional Placement (QIP). “The equity cult in India is now well established… and regular SIP flows are likely to continue,” he said in an interview with ET Now. However, these flows have not significantly increased the secondary market as FIIs are net sellers, while IPOs and QIPs absorb significant liquidity, Sabharwal said.
Despite continued SIP contributions, net inflows to the secondary market have not been significant… “As foreign investors have been sellers and QIPs as well as IPOs of companies have increased. So, it is mitigating the impact on the secondary market because the flow in the secondary market on a net basis is not very significant as IPOs are taking a lot of money and then foreign investors are mostly sellers,” Sabharwal said.
Meanwhile, the Nifty 50 faced headwinds in the form of valuation concerns, earnings downgrades and a weaker rupee, which touched a record low of 85.93 against the dollar. FIIs, responding to these challenges, have shifted their focus to safer opportunities such as the US markets, where strong bond yields and a strong dollar offer greater appeal.
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Adding to the bearish outlook, brokerage firm HSBC recently downgraded India’s market outlook to neutral and revised the Sensex’s 2025 target, further dampening sentiment.
Globally, uncertainties surrounding the policies of the US Federal Reserve and possible trade policies under the administration of Donald Trump have increased risk aversion, limiting foreign participation in Indian markets. The cautious FII attitude contrasts with the resilience of domestic investors, who continue to invest in SIPs for long-term wealth creation despite Nifty’s poor performance.
Sabharwal also noted that while SIP flows provide continued liquidity, their limited impact on the secondary market highlights the challenge of sustaining broader market momentum. Sustained negative returns could eventually dampen retail enthusiasm, he warned.
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(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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