February 23rd 2025.
In the bustling city of New Delhi, foreign investors have been making headlines as they have pulled out a staggering amount of Rs 23,710 crore from the Indian equity markets this month. This has caused total outflows to surpass Rs 1 lakh crore in 2025, which is quite concerning considering the current global trade tensions.
Chief Investment Strategist of Geojit Financial Services, V K Vijayakumar, predicts that we will see a revival of FPI investment in India once the economic growth and corporate earnings start to pick up. He believes that this could possibly happen within the next two to three months.
According to data from the depositories, Foreign Portfolio Investors have sold off shares worth Rs 23,710 crore so far this month. This follows a net outflow of Rs 78,027 crore in January, bringing the total outflow by FPIs to a staggering Rs 1,01,737 crore in 2025. As a result, the Nifty has yielded negative returns of 4 per cent year-to-date.
The market has been on edge due to reports that US President Donald Trump is considering implementing new tariffs on steel and aluminum imports, as well as reciprocal tariffs on other countries. Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India, believes that this has heightened concerns and caused FPIs to reassess their exposure to emerging markets, including India.
On the domestic front, disappointing corporate earnings and the continuous depreciation of the Indian rupee have further diminished the appeal of Indian assets, according to Srivastava. Since Trump's victory in the US presidential elections, the US market has been attracting a significant amount of capital from around the world. However, China has recently emerged as a major destination for portfolio flows, as Vijayakumar notes.
The Chinese president's new initiatives with leading businessmen have sparked hopes of a growth recovery in China. Vijayakumar believes that this could result in a "Sell India, Buy China" trend, but cautions that this has happened in the past and tends to fizzle out as there are underlying structural problems limiting China's economic growth.
In addition to pulling out from the equity market, FPIs have also withdrawn money from the debt market, with Rs 7,352 crore being withdrawn from the debt general limit and Rs 3,822 crore from the debt voluntary retention route. Overall, it seems that foreign investors are taking a cautious approach, as their investments in Indian equities were significantly reduced in 2024 with net inflows of only Rs 427 crore. This is in stark contrast to the impressive net inflows of Rs 1.71 lakh crore in 2023, driven by optimism over India's strong economic fundamentals. In comparison, 2022 saw a net outflow of Rs 1.21 lakh crore due to aggressive rate hikes by global central banks.
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