Foreign investors have pulled out Rs 34,574 crore from the Indian equity markets in February pushing total outflows to Rs 1.12 lakh crore in the first two months of 2025 amid rising global trade tensions and concerns over corporate earnings growth.
"Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of FPIs," Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors, said.
According to the data with the depositories, Foreign Portfolio Investors (FPIs) offloaded shares worth Rs 34,574 crore from Indian equities in February.
This came following a net outflow of Rs 78,027 crore in the entire January.
With these, the total outflow by FPIs has reached Rs 1,12,601 crore in 2025 so far, data with the depositories showed.
The massive selling by FPIs has resulted in the BSE's benchmark Sensex falling over 6 per cent year-to-date.
The recent market sell-off has been influenced by rising US bond yields, a strengthening US dollar, and global economic uncertainties, leading to a shift in investor focus towards US assets, Bhowar said.
According to him, the earnings reports for the third quarter of fiscal year 2025 have been modest, indicating an atmosphere of uncertainty.
This issue is further compounded by falling commodity prices and reduced consumer spending, which adversely impact corporate profits and diminish the appeal of Indian equities to foreign investors, he added.
"FPIs are focused on selling in India because valuations in India are high and moving money to Chinese stocks where valuations are much lower.
"But in the process, they are selling in the best performing sector with attractive valuations," V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.
An important paradox in FPIs selling is that they are selling heavily in financial services, the sector which is doing well and the valuations are attractive.
Additionally, they withdrew money from the debt market. They pulled out Rs 8,932 crore from debt general limit and Rs 2,666 crore from debt voluntary retention route.
The overall trend indicates a cautious approach by foreign investors, who scaled back investments in Indian equities significantly in 2024, with net inflows of just Rs 427 crore.
This contrasts sharply with the extraordinary Rs 1.71 lakh crore net inflows in 2023, driven by optimism over India's strong economic fundamentals. In comparison, 2022 saw a net outflow of Rs 1.21 lakh crore amid aggressive rate hikes by global central banks.
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