Stock Watch: Index Derivatives Drop to 1-Month Lows; Notable Stocks to Monitor such as Adani Power, Sun Pharma under Focus by Foreign Institutional Investors (FIIs)
In August 2025, Foreign Institutional Investors (FIIs) have been selling off key stocks, particularly in the Indian IT sector, leading to significant outflows and a downturn in several major sectors.
The IT sector has been hit hardest, with an outflow of approximately ₹19,901 crore (around $2.5 billion), due to disappointing earnings and a 25% fall in the Nifty IT index from its peak. This selling pressure has also been observed in the financial, realty, auto, and oil & gas sectors, with FIIs withdrawing a total of $4.17 billion from these sectors during this period.
However, sectors such as services, metals, consumer services, Fast-Moving Consumer Goods (FMCG), and telecom are reportedly receiving positive inflows from FIIs, indicating less downside or even some recovery potential.
Among the index constituents, specific smallcaps like Aditya Birla Fashion and Retail, despite robust growth prospects, have seen selling pressure, likely due to portfolio rebalancing or profit booking.
The selling pressure is also evident in the Nifty Pharma Index, where major constituents such as Cipla, Lupin, Dr Reddy's, Sun Pharma, Divi's Labs, Zydus Lifesciences, Torrent Pharma, and Aurobindo Pharma have either broken below critical support levels or seen MACD signal line breakdowns.
Derivatives data reflects a negative sentiment, with nearly 85% of near out-of-the-money put options seeing long positions, and over 90% of near out-of-the-money call options experiencing short build-up. This negative sentiment is further reinforced by the fact that only 20% of Nifty 50 constituents are trading above their respective 20-day Simple Moving Average (SMA), with no sectoral index other than FMCG having more constituents above this key moving average.
The Nifty Metal Index has also broken below its ascending trend channel, forming a large bearish candle, and technical indicators suggest continued downside. The index failed to close above the Supertrend level of 22,644 on the weekly chart, and early signs of exhaustion are visible in the MACD histograms.
These technical breakdowns in index constituents point to further downside risk, and sustained weakness in these names could drag the index toward the 9,000 level. The Nifty Pharma Index has also shown bearish signals, with around 90% of stock futures seeing short additions on Friday, and 85% showing week-on-week short build-up.
In conclusion, the selling pressure from FIIs is causing further downside in key sectors, particularly the IT sector, and some other sectors such as Pharma. This trend is expected to continue, and investors should make their own investment decisions based on their specific objectives, resources, and after consulting independent advisors.
This article reflects the personal views of the author, Anand James, Chief Market Strategist at Geojit Investments.
References:
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- Despite the selling pressure from Foreign Institutional Investors (FIIs), sectors such as services, metals, consumer services, Fast-Moving Consumer Goods (FMCG), and telecom are receiving positive inflows, indicating some recovery potential for these sectors.
- The Indices, like the Nifty IT, financial, realty, auto, oil & gas, and Pharma have witnessed significant outflows and a downturn, following FIIs' selling off key stocks, particularly in the Indian IT sector.
- In the stock-market, derivatives data reflects a negative sentiment, with a higher proportion of put options seeing long positions and call options experiencing short build-up, signaling bearish market conditions.
- Among the index constituents, specific stocks like Aditya Birla Fashion and Retail, despite robust growth prospects, have seen selling pressure, likely due to portfolio rebalancing or profit booking.
- Investors should consider the current trend of selling pressure, particularly in the IT and Pharma sectors, and make their own investment decisions based on their specific objectives, resources, and after consulting independent advisors in the field of finance and investing, including the advice of Anand James, Chief Market Strategist at Geojit Investments.
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