Trump tariffs, valuations and earnings drag foreign ownership of Indian equities to a seven-month low in August

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Weighed down by sustained selling, foreign portfolio investors’ (FPIs) share in Indian equities hit a seven-month low in the first half of August 2025, reaching 15.98 percent which is the lowest since January, data from the National Securities Depository Limited (NSDL) showed.

In terms of value, the FPI assets under custody dropped to Rs 71.08 lakh crore during the first fortnight of the month, down 1.22 percent from Rs 71.96 lakh crore in July. FPIs sold equities worth nearly Rs 21,000 crore during the fortnight following net withdrawals of Rs 17,741 crore in July, marking a sharp reversal from inflows of Rs 38,673 crore between March and June.

So far in 2025, foreign investors have offloaded over Rs 1.15 lakh crore worth of shares in NSE-listed companies.

Analysts attributed the selloff to subdued first-quarter earnings, elevated market valuations and rising US-India trade frictions that have prompted global investors to rotate money into other markets such as Korea, Latin America and China.

Despite foreign outflows, domestic measures - including personal tax rebates, proposed GST rationalisation and a 100 bps policy rate cut by the Reserve Bank of India - are expected to spur consumption and earnings in the second half of the year, experts have said, adding that a rebound in corporate performance could be the key to reviving overseas interest.

During the first half of August, sectoral data revealed heavy FPI selling in financial services (Rs 13,471 crore) and information technology (Rs 6,380 crore), alongside outflows from oil and gas (Rs 4,091 crore), power (Rs 2,350 crore), healthcare (Rs 2,100 crore), real estate (Rs 1,211 crore), FMCG (Rs 1,150 crore), consumer durables (Rs 1,000 crore) and consumer services (Rs 1,000 crore). In contrast, selective buying was seen in telecom (Rs 7,446 crore), construction materials (Rs 1,690 crore), construction (Rs 1,378 crore), capital goods (Rs 1,132 crore) and metals (Rs 606 crore).

Domestic institutional investors (DIIs) continued to provide a cushion with a combined share in listed companies rising to a record 17.82 percent in the June quarter from 17.62 percent in March, with their Indian equity holdings valued at Rs 81.06 lakh crore. Mutual funds’ share climbed to 10.61 percent in July from 10.45 percent in June, with holdings touching Rs 47.71 lakh crore.

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