Rs 1.5 lakh crore selloff by FIIs so far in 2025 and counting

FII

Foreign investors are selling Indian equities like there’s no tomorrow, with secondary market outflows in 2025 already hitting record levels — and four months of the year still to go. The scale of the selloff has made this the heaviest year of foreign selling ever witnessed in India’s markets.

Year-to-date, foreign institutional investors (FIIs) have offloaded more than Rs 1.5 lakh crore in the secondary market, surpassing all previous annual records, according to NSDL data.

FII Investment

The sell-off is being driven by slowing corporate earnings, unattractive valuations, heightened geopolitical uncertainties, and more appealing opportunities in overseas markets.

Analysts point out that markets such as the US, China, and Europe offer cheaper valuations and stronger performance. While India remains the fastest-growing major economy, the current environment has prompted portfolio managers to shift from a “buy-and-hold” stance to tactical asset allocation, where India is no longer a preferred bet.

So far in 2025, Indian benchmarks Sensex and Nifty have gained about 3.5 percent each, significantly underperforming global peers. The S&P 500 and Nasdaq have surged 12 percent, Europe’s FTSE 100, CAC, and DAX have risen over 20 percent, while Japan’s Nikkei has climbed 18 percent. Hong Kong’s Hang Seng and China’s CSI 300 have advanced 29 percent and 10 percent, respectively.

Sunny Agrawal of SBI Securities cites trade deal uncertainty and a potential extension of US-China negotiations as additional factors diverting FII flows. China, after years of underperformance relative to India, now appears poised for a potential tariff advantage.

In valuation terms, India’s benchmark indices are trading at just over 20 times one-year forward earnings, above their 10-year average of 19.3 times. The MSCI India and MSCI China indices trade at 21.6 times and 11.7 times, respectively, compared with their long-term averages of 20 times and 11.3 times.

Sahil Shah, CIO and Fund Manager at Equirus Asset Management, warns that a shift in US policy towards India could affect export momentum, especially in high-employment sectors. While exports to the US account for around 3 percent of GDP—and 30 percent of this trade is currently outside tariff scope—any disruption could trigger wider economic effects.

Interestingly, FIIs are actively participating in primary markets despite the exodus from secondary trading. Analysts note that initial public offerings (IPOs) are delivering 15–20 percent listing gains, attracting global funds in search of short-term returns. Moreover, some IPOs feature unique business models in which FIIs are willing to take long-term positions.

Siddharth Bhamre, Head of Research at Asit C. Mehta Investment Intermediates, expects limited upside and possible downside in Indian markets over the next two to three quarters. He advises a cautious, defensive, and tactical approach.