Why are FIIs selling in India and can the Budge turn around FII flows?

FPI selling is not surprising as macros are under pressure. Fed has turned hawkish and input cost inflation is on the way up and gradually out of control. In addition, Indian equity valuations by P/E ratio are making other Asian markets look more attractive. Also, the IPOs have dried up. It remains to be seen what happens to the digital IPOs, which had received quite a bit of flak in the last few weeks with most of them losing 40% to 50%.

You are right that the Budget could make a big difference. FPIs expect a Union Budget that is reformist and bold. That means; reforms and spending must continue. They also want the Indian economy to start growing above pre-COVID levels. Here, Budget can play a catalytic role. More than anything, FPIs will be pleased if the government provides a time table for fiscal deficit reduction in the foreseeable future. That is something that will attract the FPIs.