Indian Markets Grapple with FII Selling and Rupee Drop Ahead of RBI Rate Decision

Indian markets are currently navigating a period of flat growth, influenced by persistent foreign institutional investor (FII) selling and a depreciating rupee. Nifty is striving to hold its support at the 25,850 level, indicating a potential positive short-to-medium-term direction if sustained.

However, a significant FII outflow of approximately ₹2,80,000 crores year-to-date has pressured both equity markets and the rupee, which hit an all-time low above 90 against the dollar. This backdrop sets the stage for the upcoming Reserve Bank of India (RBI) Monetary Policy Committee (MPC) decision.

While strong Q2 GDP growth of 8.2% and low inflation (0.25%) suggest no immediate need for rate cuts, the weakening rupee remains a critical concern for the RBI. Simultaneously, the primary market is buzzing, with the Meesho IPO attracting considerable retail and institutional interest, offering listing gains but also reminding investors of the risks of not booking timely profits.