Why FPIs Pull Out ₹21,000 Crore From Indian Equities, Know- What Does It Mean For The Stock Market?

Mumbai: Foreign Portfolio Investors (FPIs) have continued their selling streak in Indian equities, pulling out nearly Rs 21,000 crore in just the first half of August. The withdrawals were triggered by a mix of global and domestic factors, including weak first-quarter earnings, trade tensions between the US and India, and a depreciating rupee.

According to depository data, FPIs withdrew a net sum of Rs 20,975 crore till August 14. This adds to the Rs 17,741 crore outflow in July, bringing the total equity outflow for 2025 so far to Rs 1.16 lakh crore. The outflows come after three consecutive months of strong inflows between March and June, when FPIs pumped in over Rs 38,000 crore.

Global cues dampening sentiment

Analysts say global uncertainties remain the key driver behind the sustained selling. Geopolitical tensions, unclear US interest rate trajectory, and a strengthening dollar have pushed investors towards safer assets. Himanshu Srivastava of Morningstar noted that the rising US dollar makes emerging markets like India less attractive, leading to risk aversion among foreign investors.

Adding to the concern are India’s tepid corporate earnings and high market valuations, which have made equities vulnerable to corrections, according to VK Vijayakumar of Geojit Investments.

Sectoral impact of FPI selling

The selling has been most pronounced in IT stocks, dragging the IT index lower. However, other sectors like banking and financial services have shown resilience, supported by fair valuations and continued institutional interest. This selective approach indicates that while FPIs are cautious, they are not exiting Indian markets entirely.

Positives for market outlook

Despite the heavy selling, analysts also point to a few positives. The easing of US-Russia tensions and the reduced likelihood of a proposed 25 percent secondary tariff on India after August 27 are seen as supportive for investor sentiment. Additionally, S&P’s upgrade of India’s credit rating from BBB- to BBB could encourage long-term foreign inflows.

Interestingly, while equities have faced withdrawals, FPIs showed interest in India’s debt market, investing Rs 4,469 crore in the debt general limit and another Rs 232 crore through the voluntary retention route during the same period.

What lies ahead

Going forward, FPI flows will likely depend on global developments—particularly decisions on tariffs, movement of the US dollar, and the Federal Reserve’s stance on interest rates. Domestically, corporate earnings in the upcoming quarters will also play a key role in determining the strength of foreign investor confidence.