Foreign Portfolio Investors are not letting up on their selling spree in Indian equities. They pulled out a hefty Rs 17,955 crore in just the first two weeks of December. This relentless withdrawal has pushed the total outflow for 2025 to a staggering Rs 1.6 lakh crore, or about USD 18.4 billion, according to NSDL data.
The pressure on domestic stock markets continues unabated. This follows a net outflow of Rs 3,765 crore recorded in November, maintaining a trend of foreign capital flight.
This recent selling comes after a brief, welcome pause. In October, FPIs invested Rs 14,610 crore, ending three consecutive months of heavy withdrawals. However, that relief proved to be short-lived.
The selling resumed with significant force. FPIs offloaded equities worth Rs 23,885 crore in September, a massive Rs 34,990 crore in August, and Rs 17,700 crore in July. This pattern highlights a consistently cautious approach from overseas investors throughout the year.
So, what’s driving this sustained exodus? Market experts point to a confluence of global and local factors. A sharp depreciation in the Indian rupee has eroded dollar-denominated returns for foreign investors.
Simultaneously, Indian stock valuations remain elevated. This makes the market less attractive compared to other emerging economies that are currently offering better value propositions.
Himanshu Srivastava of Morningstar Investment Research India elaborated on the global headwinds. He cited high US interest rates and tight global liquidity as key reasons.
There’s also a clear preference for safer investments in developed markets. This shift has significantly weakened investor interest in riskier emerging markets like India.
Vaqarjaved Khan from Angel One added more context to the selling pressure. He pointed to year-end portfolio adjustments and global fund rebalancing activities.
Ongoing economic uncertainty worldwide is another crucial factor. These elements combined are prompting foreign investors to reduce their exposure.
Despite this heavy foreign selling, Indian markets have shown remarkable resilience. They have not experienced a sharp, corresponding fall in prices.
This stability is largely thanks to strong countervailing forces. Domestic institutional investors have stepped up in a big way.
DIIs invested a robust Rs 39,965 crore during the same period. Their substantial buying has more than offset the outflows from foreign portfolio investors, providing crucial market support.
Looking ahead, some experts see a silver lining. They believe this intense selling pressure may not last much longer.
VK Vijayakumar of Geojit Investments expressed this optimism. He stated that continued heavy selling is unlikely given India’s strong economic fundamentals.
The country’s robust growth trajectory and improving corporate earnings outlook are key positives. These factors could eventually stem the tide of outflows.
Vaqarjaved Khan also highlighted a potential catalyst for a turnaround. Progress on a US-India trade agreement could be a game-changer.
Such a development would boost confidence and potentially lure foreign investors back to Indian shores. It represents a significant upside opportunity.
Meanwhile, the story in the debt market presents a mixed picture. FPIs withdrew Rs 310 crore under the general investment limit.
However, they showed a slight interest in the voluntary retention route, investing Rs 151 crore there. This indicates selective, rather than blanket, pessimism.