The exodus of Foreign Portfolio Investors (FPIs) from Indian equity markets continued unabated this month, with net outflows touching ₹22,272 crore till February 14, depositories data showed.
Taking together the net outflows of ₹78,027 crore in January 2025, the total net withdrawal so far this calendar year stood at ₹ 99,299 crore.
Except for one session, FPIs remained net sellers throughout the month, as the Trump trade effect drove capital away from emerging markets.
Despite the FPI’s sustained selling spree, the Indian government remains unperturbed, viewing the trend as a phase of profit-booking rather than a sign of distress. “Indian fundamentals remain strong, and most FPIs are exiting only after booking healthy profits,” official sources said.
What’s Driving FPI Outflows?
The strengthening dollar and rising U.S. bond yields, triggered by Donald Trump’s return to the White House, have made U.S. assets more attractive, leading to capital flight from Indian equities.
In contrast to the heavy selling in January and February 2025, FPIs were net buyers of ₹15,448 crore in December 2024 but had offloaded ₹94,017 crore and ₹21,612 crore in October and November, respectively.
Expert’s take
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Despite many positive developments like a good Budget, rate cut by the RBI and slight improvement in Q3 results, the FPIs continued to press sales. The total FPI selling this month through February 14 stood at ₹23,242 crore in the cash market. This takes the total FPI selling in the cash market to ₹ 105145 crores in 2025”.
Since largecaps dominate the assets under custody of FPIs, largecaps have been facing the brunt of FPI selling. Relentless selling in largecaps has made their valuations attractive, opening up opportunities for long-term investors, Vijayakumar added.
“Reversal of FPI strategy will happen when the dollar index moves down. This will happen but we can’t predict when”, he said.
Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors, said, “Recent shifts in global policies, especially those emerging from the U.S., are invoking a sense of uncertainty among Foreign Portfolio Investors (FPIs), which in turn is reshaping their investment strategies in dynamic markets like India”.
The allure of U.S. assets has intensified, driven by rising bond yields that have made these investments seem more secure. This has led many FPIs to pivot away from Indian and other emerging market stocks, he said.
Investors are increasingly drawn to the promise of safer returns offered by U.S. equities, leaving many markets, including India, in their shadow.
Himanshu Srivastava, Associate Director—Manager Research, Morningstar Investment, said that foreign portfolio investors (FPIs) extended their selling streak in the Indian equity markets this past week, marking the tenth consecutive week of net outflows.
The sustained exodus of foreign capital from Indian equities was driven by a combination of global and domestic factors.
A major catalyst was the escalation in global trade tensions, which significantly weighed on investor sentiment. Market concerns heightened following reports that U.S. President Donald Trump was considering imposing new tariffs on steel and aluminum imports, along with reciprocal tariffs on several countries. These developments reignited fears of a potential global trade war, prompting FPIs to re-evaluate their exposure to emerging markets, including India.
Despite the recent market correction, elevated valuations in Indian equities, especially relative to other emerging markets, would have most likely prompted investors to reallocate funds to more attractively priced markets, contributing to the ongoing sell-off, he said.
Another significant factor driving outflows was the elevated U.S. bond yields, which boosted the appeal of U.S. assets, offering investors a safer and higher return alternative. As a result, FIIs continued to withdraw from Indian equities in favour of U.S. markets, where risk-adjusted returns appeared more favourable, he said.
“These factors collectively fuelled FPI outflows during the week, underlining the cautious stance adopted by foreign investors amid prevailing global uncertainties and domestic challenges”, Srivastava added.