FIIs have stopped selling in Indian markets after 38 consecutive days, thanks to MSCI index rebalancing and the political stability following the BJP-led NDA's victory in Maharashtra.

However, market analysts are doubtful about the long-term relationship between FIIs and India due to ongoing negative sentiment among active FIIs. Concerns about high valuations and increased demands from corporate India are expected to hinder sustained FII engagement.

The PE ratio of the MSCI India index has decreased from 23.4x to 22.6x, but it still trades at a significant 58 percent premium compared to emerging markets, up from 53 percent in September. Analysts predict mid-teens growth for Nifty companies in the latter half of FY25 and early FY26, indicating the potential for further earnings downgrades. The Nifty index remains at 21x forward earnings, with valuations across sectors, excluding banks, still considered steep.