FPI Exodus: Indian Markets Bleed ₹2,700 Crore Daily Amid Global Jitters!
Foreign Portfolio Investors (FPIs) have continued their selling spree for the fifth consecutive month, further deepening their withdrawal from the Indian stock market. In February alone, FPIs pulled out a substantial ₹41,748 crore from the secondary market, driven by growing global trade uncertainties and the increasing attractiveness of U.S. bond yields.
The final trading session of February saw the most significant single-day sell-off of 2025 so far, with foreign investors offloading stocks worth ₹11,639 crore. This surpassed the previous record set earlier in the year on January 14, when FPIs withdrew ₹8,132 crore in a single day.
Since the beginning of 2025, FPIs have collectively withdrawn a staggering ₹1,23,652 crore from Indian exchanges, highlighting the persistent risk-off sentiment among global investors. Out of the 46 trading sessions held this year, FPIs have been net sellers in 43 sessions, reflecting a strong bearish trend in foreign fund flows. On average, they have pulled out approximately ₹2,688 crore per day, signaling sustained pressure on Indian equities.
The continued outflows come at a time when global markets are facing heightened volatility due to geopolitical tensions, inflationary concerns, and the allure of safer investment options such as U.S. treasuries. As interest rates in developed economies remain elevated, foreign investors appear to be rebalancing their portfolios, reducing exposure to emerging markets like India.
While domestic factors such as corporate earnings and policy measures may influence market sentiment in the coming months, the persistent FPI outflows indicate that global macroeconomic trends continue to play a crucial role in shaping foreign investor behavior.
In the month of February, Foreign Portfolio Investors (FPIs) maintained a strong selling trend, remaining net sellers in 18 out of the 20 trading sessions. This continued the pattern of heavy foreign outflows seen earlier in the year.
The selling pressure was even more pronounced in January, when FPIs offloaded stocks in 25 out of the 26 trading sessions, marking an almost uninterrupted withdrawal of funds from the Indian markets. During that month alone, they pulled out a significant ₹81,904 crore, reflecting heightened investor caution amid global economic uncertainties.
The consistent selling over the past two months underscores the sustained risk-off sentiment among foreign investors, influenced by factors such as global trade tensions, shifting monetary policies, and the relative attractiveness of alternative investment avenues.
Despite the heavy selling by Foreign Portfolio Investors (FPIs), Domestic Institutional Investors (DIIs) have been actively absorbing a significant portion of the outflows. However, their efforts have not been sufficient to stabilize the markets, as selling pressure continues to weigh on investor sentiment.
Market analysts have pointed out that FPIs are not the only ones pulling out funds. Family offices, high-net-worth individuals (HNIs), and even retail investors have also begun reducing their market exposure. Many of these investors are reportedly looking to protect their margins amid heightened volatility, adding to the overall selling pressure. As a result, DIIs have been left to bear the full weight of the sell-off, attempting to cushion the impact but struggling to reverse the downward trend.
The sustained outflows from overseas investors have had a pronounced impact on Indian equities. In February alone, both the Nifty 50 and the Sensex recorded a steep decline of 6%, making it their worst monthly performance since October 2024. Moreover, this downturn extends a prolonged period of weakness in the markets, with both indices closing in negative territory for five consecutive months. From their respective peaks, the indices have now corrected by 16%, highlighting the extent of the ongoing market decline.
This persistent downward movement reflects broader concerns among investors, driven by global economic uncertainties, rising interest rates in developed markets, and shifting capital flows. While domestic institutions continue to provide support, the broader trend indicates that market recovery remains challenged by external and internal headwinds.
The broader Indian market has experienced even more intense selling pressure as Foreign Portfolio Investors (FPIs) continue to withdraw funds at a steady pace. While large-cap indices have faced notable declines, the impact has been even more pronounced in the midcap and small-cap segments. The Nifty Midcap 100 and Nifty Smallcap 100 indices have both plunged significantly, falling by 25% from their all-time highs. This sharp correction reflects heightened investor caution in these segments, which are often more volatile and sensitive to market sentiment shifts.
The effects of the ongoing sell-off have not been limited to equities alone. The pressure from foreign outflows has also had a noticeable impact on the Indian currency. The rupee weakened by approximately 0.9% in February, reflecting the broader concerns surrounding capital outflows and global financial conditions.
The combination of sustained selling in equities and currency depreciation underscores the broader challenges facing Indian markets. As foreign investors continue to adjust their portfolios in response to global economic trends, the repercussions are being felt across asset classes, adding to market uncertainty.
Multiple Headwinds Weigh on Investor Sentiment as Market Downturn Persists
Investor sentiment in the Indian stock market continues to remain under pressure due to a combination of global and domestic challenges. While escalating global trade tensions have played a significant role in driving risk aversion, other factors such as weaker-than-expected corporate earnings in the December quarter, high stock valuations, and concerns over a slowdown in economic growth have further dampened confidence. These elements have contributed to a prolonged market downturn, prompting investors to adopt a more cautious approach.
FPI Holdings in Large Caps Decline Amid Sustained Selling
Despite their persistent selling in recent months, Foreign Portfolio Investors (FPIs) continue to hold a substantial share of Indian equities. According to a report by BNP Paribas Exane, a European equity research firm, FPIs still have an estimated $800 billion invested in the Indian stock market. However, their holdings in large-cap stocks have been gradually declining as they continue to pull out funds.
This suggests that if the selling pressure remains unabated, market volatility may persist. Given the significant exposure that FPIs still maintain, any further liquidation of their positions could continue to exert downward pressure on Indian equities. The evolving global macroeconomic landscape, coupled with domestic growth concerns, will likely play a crucial role in determining the trajectory of FPI flows in the coming months.
FPI Ownership in Indian Equities Drops to Multi-Year Lows, Large Caps Face Higher Selling Pressure
Foreign Portfolio Investors (FPIs) have been steadily reducing their stakes in Indian equities, particularly in large-cap stocks, as indicated by the latest report from the National Stock Exchange (NSE).
According to the report, FPI ownership in NSE-listed companies and Nifty 50 firms saw a sequential decline in the December quarter. Their holdings in NSE-listed companies dropped by 30 basis points (0.30 percentage points) quarter-on-quarter (QoQ), reaching 17.4%—the lowest level in 13 years. Similarly, in Nifty 50 companies, FPI ownership fell by 15 basis points (0.15 percentage points) QoQ, hitting a 12-year low of 24.3%.
In contrast, FPI holdings in the broader Nifty 500 Index remained stable at 18.8% during the same period. This suggests that while foreign investors have been reducing their exposure to Indian equities, the selling pressure has been more concentrated in large-cap stocks rather than mid- and small-cap segments.
The decline in FPI ownership underscores the broader trend of foreign capital outflows, influenced by factors such as global economic uncertainties, shifting monetary policies, and valuation concerns. As FPIs adjust their portfolios, their reduced presence in large-cap stocks highlights the changing investment landscape within Indian markets.
FPIs Shift Focus to China Amid Policy Support and Tech Sector Optimism
Recent reports indicate that Foreign Portfolio Investors (FPIs) are reallocating funds from Indian markets to China, driven by expectations of an economic rebound following policy measures introduced by Beijing. Investors are optimistic that these initiatives will provide much-needed support to China’s economy, making its markets more attractive compared to other emerging economies.
Additionally, renewed enthusiasm for Chinese technology stocks—particularly those listed in Hong Kong—has further fueled this shift in capital flows. A key development boosting sentiment in the sector is the emergence of DeepSeek, a Chinese AI startup positioning itself as a free alternative to ChatGPT. This has drawn increased investor interest in China’s rapidly evolving artificial intelligence and technology landscape, contributing to a stronger outlook for the region’s stock markets.
Volatility Expected to Persist as FPIs Adopt a Cautious Approach
Market experts suggest that the ongoing volatility in Indian equities is likely to continue as FPIs remain wary of current market conditions. Vipul Bhowar, Senior Director of Listed Investments at Waterfield Advisors, highlighted that elevated valuations in Indian stocks, coupled with concerns over corporate earnings growth, have contributed to the sustained outflows of foreign investments.
The earnings reports for the third quarter of the fiscal year 2025 have been relatively modest, adding to the uncertainty. Forward earnings estimates have struggled to gain momentum, with more companies seeing downward revisions than upgrades. This trend has been particularly noticeable among firms outside the Nifty 50 index, suggesting broader market concerns beyond just large-cap stocks.
As FPIs reassess their investment strategies in light of global economic conditions, corporate earnings performance, and relative valuations across markets, their cautious stance is expected to keep market volatility elevated in the near term.
Declining Commodity Prices and Weak Consumer Spending Add to Market Pressures
The challenges facing Indian equities have been further intensified by a combination of weakening commodity prices and a slowdown in consumer spending. These factors have had a direct impact on corporate earnings, as falling prices for key raw materials and reduced consumer demand have weighed on revenue growth and profit margins across multiple sectors. As a result, the investment appeal of Indian equities for foreign investors has diminished, contributing to the broader trend of sustained outflows from the market.
Global Factors Drive Capital Shift Toward US Assets
The recent sell-off in Indian equities has also been influenced by broader global financial trends, particularly rising US bond yields and the strengthening of the US dollar. As US treasury yields continue to climb, they offer investors a more attractive, lower-risk alternative compared to emerging market equities. Additionally, a stronger dollar makes investments in emerging markets relatively less appealing, further prompting a shift in capital allocation.
Compounding these factors are ongoing global economic uncertainties, which have led investors to reassess their portfolios and prioritize stability. This has resulted in a growing preference for US assets, as they are perceived to offer better risk-adjusted returns in the current macroeconomic environment. Consequently, Indian markets have faced increased selling pressure as foreign investors continue to rebalance their holdings in response to evolving global financial conditions.
FPI Holdings in Indian Equities Drop to Multi-Year Lows Amid Sustained Selling
As a result of prolonged selling by Foreign Portfolio Investors (FPIs), their holdings in Indian equities have declined to multi-year lows. This persistent outflow reflects cautious investor sentiment, with many preferring to stay on the sidelines rather than increase their exposure to Indian markets at this stage.
Market participants are likely to wait for clear signs of stability and recovery before considering a return. Factors such as improvements in corporate earnings, better macroeconomic indicators, or a shift in global financial conditions could play a key role in influencing their re-entry.
Until such positive triggers emerge, Indian markets are expected to remain volatile. The ongoing combination of global economic uncertainties and domestic challenges continues to create an environment of caution, keeping fluctuations in stock prices elevated in the near term.
