New Delhi, March 26 -- Indian stock markets have been under pressure in recent months, with foreign institutional investors (FIIs) selling aggressively. The rupee has weakened, mid- and small-cap stocks have lost liquidity, and earnings growth has disappointed. This has led to a sharp market correction, particularly in mid and small caps. But why are FIIs selling, and when can we expect them to return?

Since September 2024, FIIs have been net sellers of Indian stocks, pulling out over Rs.1 lakh crore between October 2024 and February 2025. Mid-cap stocks fell by 16-20 percent, small-cap stocks dropped by 19-25 percent, and Nifty stocks saw a decline of 11-14 percent.

The heaviest sales took place in October 2024 and January 2025. In Oct...