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If foreign institutional investor (FII) confidence in Indian market is to resume, corporate earnings have to improve in the next quarter (Q4) and the US-India trade deal should happen, analysts said on Saturday.

While the former is likely in the January-March quarter (Q4 FY26), there is no clarity at all on the timeline of the latter.

“This is the biggest uncertainty weighing on the market now,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

FPIs not only continued their selling spree in the week ended January 23, but also increased the intensity of their selling.

Total FPI selling in the equity market this month (through January 23) stood at Rs 33,598 crore, as per NSDL data. This the highest monthly selling figure since August 2025.

“Sentiments remained very weak due to a combination of factors such as sustained rupee depreciation, lack of any finality regarding US-India trade deal and unimpressive Q3 results, so far, which are not indicating any pick up in corporate earnings,” said Vijayakumar.

The sustained selling by FIIs has led to 2.5 per cent decline in Nifty for the week ending January 23, resulting in erosion of Rs 16 trillion of market cap in a week, said analysts.

A major factor that pushed FII selling has been the continuous decline in the rupee which touched Rs 91.96 to the dollar on Friday.

Market participants believe that the delay in the US-India trade agreement will widen India’s trade and current account deficits further impacting the rupee. Sustained FII selling is in anticipation of this rupee depreciation.

Investors are keeping an eye ahead for cues from Union Budget 2026 and guidance from the Fed on the trajectory of interest rate cuts. Analysts maintain that elevated FII short positions, oversold momentum indicators, and pre-Budget positioning could trigger bouts of short covering.

(With inputs from IANS)