IFA Global Weekly Outlook #1
Domestic Equities Weekly Recap: Sector Rotation and FPI Pressure
17 August 2025 | By IFA Global | Category - IFA Weekly Wrap - Newsletter
17 August, 2025
Domestic Equities Weekly Recap: Sector Rotation and FPI Pressure
Indian equities delivered a steady performance this week, with broad-based gains across benchmark indices. The Nifty50 advanced 1.1%, while the Midcap100 and Smallcap250 posted gains of 0.9% and 0.7%, respectively. Despite the positive momentum, foreign portfolio investors (FPIs) remained net sellers, offloading USD 2.4 billion worth of domestic equities in August so far.
From a valuation standpoint, indices continue to trade at elevated levels. The Nifty50 is valued at 21.8x trailing PE and 20.8x forward PE, while the Midcap100 and Smallcap250 trade at richer multiples of 30.8x/25.9x and 28.5x/26x, respectively.
On the sectoral front, Pharma led the rally with 3.5% gains, supported by earnings traction and defensive buying. Autos (+2.7%) and IT (+1.3%) also outperformed, reflecting cyclical strength and improving demand outlook. Metals (+0.8%), Bank Nifty (+0.6%), and Realty (+0.6%) posted modest gains, while FMCG (-0.4%) was the notable underperformer. Energy-linked indices, including Oil & Gas, remained largely flat.
Earnings season provided further support, with Nifty50 companies reporting 6.7% sales growth and 7.8% earnings growth in Q1. Factor-wise, growth, low volatility, and momentum styles outperformed, while dividend yield and value lagged.
Overall, the market continues to balance robust domestic earnings with external headwinds from sustained FPI outflows. While select pockets like pharma and autos are seeing renewed investor interest, the elevated valuations and global risk sentiment may keep near-term upside in check.
