Summary: Foreign Portfolio Investors (FPIs) have been selling off Indian equities for 13 consecutive weeks, with a net outflow of ₹24,753 crore in a week. Despite this trend, the Indian equity benchmarks saw their highest weekly gains in 2025. Experts note a moderation in the pace of FPI selling, suggesting a shift in sentiment towards the oversold Indian market. Factors such as global uncertainties, US tariff policies, and attractive valuations in other markets like China have influenced FPI behavior, sparking a broader market correction in India.
Foreign Portfolio Investors (FPIs) have continued their equity selling spree in India, marking the 13th straight week of net outflows. In just five trading sessions in the first week of March 2025, FPIs offloaded ₹24,753 crore, pushing the total outflows for the year to ₹1,37,354 crore. This persistent trend of FPI selling coincides with India’s equity benchmarks achieving their highest weekly gains in 2025. Despite the ongoing outflows, recent sessions have shown signs of moderation in FPI activity, indicating a potential shift in market sentiment. Capital market experts suggest that FPIs may be reevaluating their negative outlook on the oversold Indian equity market.
### Signs of Moderation in FPI Selling
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the continued FPI selling in early March but noted a decrease in intensity in recent days. He pointed out that a surge in Chinese stocks due to attractive valuations and positive government initiatives has diverted investor attention from Indian equities. The Hang Seng Index, with a YTD return of 23.48%, has outperformed the Nifty’s -5% YTD return. Vijayakumar emphasized that the current trend might be a short-term cyclical trade, given the historical underperformance of Chinese corporate earnings since 2008. The weakening dollar index could also influence fund flows away from the US, impacting global investment decisions.
### Impact of Global Uncertainties and Tariff Policies
Since December 13, 2024, FPIs have withdrawn $17.1 billion from Indian equity markets, reflecting their cautious stance amidst global uncertainties. US President Donald Trump’s fluctuating tariff policies have added to investor apprehensions, creating a sense of unpredictability in the market. The impending implementation of a new reciprocal tariff regime has kept the equity markets on edge, awaiting further details. Himanshu Srivastava, Associate Director at Morningstar Investment, attributed the sustained FPI selling to both global and domestic factors, particularly the escalating trade tensions triggered by tariff disputes between major economies. The fear of a global trade war and its potential repercussions on the global economy have led FPIs to reassess their exposure to emerging markets like India.
### Market Correction and Investor Behavior
Vaibhav Porwal, Co-Founder of Dezerv, highlighted the broader implications of FPI outflows, signaling a broader market correction in India. Significant rupee depreciation, coupled with tax implications on capital gains for FPIs, has made alternative markets more appealing for foreign investors. The attractiveness of US bonds, offering stable yields and lower volatility compared to emerging market equities, has diverted FPI attention away from Indian equities. Porwal noted that the current market conditions, with major equity indices experiencing significant declines, have prompted FPIs to seek better returns in markets like China, the US, Brazil, or Thailand.
In conclusion, the persistent FPI outflows from the Indian equity markets underscore a complex interplay of global economic factors, domestic challenges, and investor behavior. While India grapples with a market correction and shifting investor sentiments, the broader implications of these trends on the economy and investment landscape remain subjects of close scrutiny and analysis. The evolving dynamics of FPI activity reflect a delicate balance between risk aversion, market valuations, and global economic uncertainties, shaping the trajectory of India’s financial markets in the near term.
