MOHAMMAD ZIYAUDDIN
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Foreign Portfolio Investors (FPIs) withdrew ₹30,015 crore from Indian equities in the first half of March 2025, extending a 14-week streak of outflows, as per official depository data. The ongoing global trade tensions and economic uncertainty have made investors cautious, leading to a sharp sell-off in emerging markets like India.
Total FPI Outflows in 2025 So Far: ₹1.42 lakh crore ($16.5 billion)
February Outflows: ₹34,574 crore
January Outflows: ₹78,027 crore
Why Are Foreign Investors Exiting Indian Equities?
1. Uncertainty Over US Trade Policies
- President Donald Trump’s aggressive trade stance has raised fears of a tariff-induced recession.
- Investors are adopting a risk-averse strategy, reducing exposure to emerging markets like India.
2. Strong US Dollar & Higher Bond Yields
- The US dollar's strength and higher Treasury yields have made US assets more attractive than Indian equities.
- The Indian rupee’s depreciation has further eroded returns for foreign investors.
3. FPIs Redirecting Investments to China
- Chinese stocks have outperformed global markets in 2025, drawing investor interest.
- Many funds exiting Indian equities are being redirected toward China.
“Although the recent dip in the dollar index slowed fund flows to the US, global trade conflicts could push investors toward safer assets like gold and the dollar,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
FPIs Still Investing in Indian Debt Market
While FPIs exited equities, they infused ₹7,355 crore into the debt general limit, showing interest in Indian bonds. However, they also withdrew ₹325 crore from the debt voluntary retention route.
Comparing FPI Trends Over the Years:
- 2023: Net FPI inflows of ₹1.71 lakh crore, fueled by optimism over India’s economic resilience.
- 2024: Net inflows were a mere ₹427 crore, indicating growing investor caution.
- 2022: Net outflows of ₹1.21 lakh crore due to aggressive global interest rate hikes.
What Lies Ahead for Indian Markets?
If global trade tensions ease, FPI flows may stabilize.
A weaker US dollar and lower US bond yields could make Indian equities attractive again.
Post-election clarity in India might bring back foreign investor confidence.
For now, cautious foreign investors continue to reduce their exposure to Indian equities, closely watching global economic conditions before making their next move.
