Foreign investors are pulling back from the Indian equity market, withdrawing over ₹30,000 crore in just the first two weeks of March 2025. This trend continues a worrying pattern, following significant outflows of ₹34,574 crore in February and ₹78,027 crore in January. Currently, the total withdrawal by Foreign Portfolio Investors (FPIs) in 2025 has reached an alarming ₹1.42 lakh crore (approximately $16.5 billion).
Ongoing Outflows from Indian Equities
Recent data revealed that FPIs offloaded shares worth ₹30,015 crore from Indian equities as of March 13. This marks the 14th consecutive week of net outflows, indicating a persistent trend of reduced investment in the Indian market.
- February Outflow: ₹34,574 crore
- January Outflow: ₹78,027 crore
- Total 2025 Outflow: ₹1.42 lakh crore
Factors Behind the Decline
The selling pressure is attributed to a mix of both global and domestic issues. Himanshu Srivastava, Associate Director at Morningstar Investment, pointed out that the uncertainty surrounding U.S. trade policies under President Donald Trump has raised fears of a potential recession spurred by tariffs. This unpredictability is pushing FPIs to be more cautious about investing in emerging markets like India.
Moreover, the rise in U.S. bond yields alongside a robust dollar is making American assets more appealing to global investors. The depreciation of the Indian rupee is compounding these challenges, diminishing returns for foreign investors and prompting them to reconsider their positions.
Investment Shifts and Cautious Strategies
V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, observed that FPIs have redirected their investments towards Chinese stocks, which have been outperforming other markets in 2025. He remarked, “The recent decline in the dollar index may restrict fund flows to the U.S. However, the ongoing trade war uncertainties could lead investors to safer assets like gold and the dollar.”
Interestingly, while FPIs withdrew ₹325 crore from the debt voluntary retention route, they invested ₹7,355 crore in the debt general limit. This indicates a cautious approach, as foreign investors significantly reduced their stakes in Indian equities, with net inflows dwindling to ₹427 crore in 2024. This is a stark contrast to the ₹1.71 lakh crore net inflows recorded in 2023, fueled by positive sentiments around India’s economic stability.
- 2024 Net Inflow: ₹427 crore
- 2023 Net Inflow: ₹1.71 lakh crore
- 2022 Net Outflow: ₹1.21 lakh crore
As the landscape continues to evolve, investors are closely monitoring these trends while assessing the broader implications for the Indian economy. The cautious approach of FPIs may reflect a broader sentiment change that could shape future investment strategies.
