FPIs remain net sellers for 4 of 5 months, sold worth ₹1.13 lakh crore in just 2 months of 2025 | Stock Market News

Foreign portfolio investors (FPIs) have started 2025 on a bearish note, pulling out a significant ₹1.13 lakh crore from Indian equities so far. After recording net inflows in December 2024, FPIs reversed their stance in the new year, triggering heavy outflows. The selloff has coincided with a sharp downturn in Indian markets, particularly in broader indices, as global economic uncertainties and high domestic valuations weigh on investor sentiment. Notably, FPIs have been net sellers in four of the last five months.

Sustained Selling and Market Impact

In February 2025 alone, FPIs have withdrawn ₹35,694 crore, following massive outflows of ₹78,027 crore in January. In contrast, December 2024 saw net inflows of ₹15,446 crore after two consecutive months of selling. FPIs had previously offloaded ₹21,612 crore in November and a record ₹94,017 crore in October.

The sustained foreign selling has dragged Indian equities lower, with benchmark indices slipping over 6 percent year-to-date (YTD). The broader market has taken an even bigger hit, as the Nifty Midcap index has declined by over 17 percent.

Overall, FPI outflows from Indian markets—including equities, debt, hybrid, and debt-VRR segments—have reached ₹1.07 lakh crore in 2025 YTD. Debt market outflows alone have totaled ₹9,529 crore.

What’s Driving the Outflows?

Experts believe the ongoing FPI selloff is influenced by multiple global and domestic factors. A stronger US dollar and attractive bond yields have made emerging market investments less appealing, leading to capital flight. However, analysts suggest that India remains a key long-term investment destination, and foreign investors may return as valuation concerns ease.

“After Trump’s victory in the US presidential elections, global capital has been flowing towards US markets. Recently, China has also emerged as a major beneficiary of portfolio inflows. The Chinese government’s outreach to business leaders has fueled optimism about a potential economic recovery, lifting the Hang Seng index by 18.7 percent in just one month. In contrast, the Nifty has declined by 1.55 percent in the same period. The ‘Sell India, Buy China’ trade may persist in the near term, but given China’s structural economic challenges, it is unlikely to be a long-term trend,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Vaibhav Porwal, Co-Founder of Dezerv, highlighted that India’s premium valuation relative to other emerging markets is also a factor behind the recent selloff.

“While India’s long-term growth outlook remains robust, concerns over near-term valuations and corporate earnings have led to profit-booking. India continues to trade at a premium compared to markets like Indonesia, South Korea, and Taiwan, prompting global investors to reassess their positions. Additionally, China’s economic stimulus measures, including policy support and regulatory easing, have renewed confidence in its markets, diverting some flows from India,” he explained.

China’s recent rally has been driven by a combination of factors, including rate cuts, liquidity injections, and measures to support its property sector. However, some experts believe that while China’s market may remain attractive in the short term, India’s strong domestic demand, digital transformation, and infrastructure push will keep it a compelling investment destination in the long run.

Outlook for FPI Flows

Despite the current outflows, experts expect FPI sentiment to improve in the coming months. “Revival of FII investment in India will be driven by economic growth and corporate earnings recovery. Signs of that are likely to emerge in the next two to three months,” Vijayakumar added.

Porwal echoed similar sentiments, stating that while external factors like US monetary policy and global risk appetite will play a role, India’s structural growth drivers remain intact. “FII flows could return to India in the next three to six months as macroeconomic fundamentals and earnings growth improve,” he noted.

In the near term, market volatility may persist as FPIs continue to rebalance their portfolios. However, with India’s economic momentum intact, foreign investor interest is expected to rebound once valuations stabilize and corporate earnings pick up.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.