- FPIs have withdrawn over ₹1.10 lakh crore from Indian equities in 2025, citing global uncertainty.
- High U.S. yields and trade tensions are pushing investors toward safer assets.
- Indian markets face valuation concerns, weak earnings, and policy uncertainty.
Foreign Portfolio Investors (FPIs) have been aggressively offloading Indian stocks, driven by a mix of domestic and global challenges. Elevated U.S. bond yields are making American assets more attractive, pulling funds away from emerging markets like India.
Adding to the turmoil, global trade tensions have further eroded investor confidence, leading to a broader risk-off sentiment. Other Asian markets are also facing similar pressure, indicating a regional trend of capital flight.
Foreign Investors Flee India: What’s Driving the Selloff
Foreign investors have offloaded a staggering ₹1.10 lakh crore from Indian equities in just two months of 2025, making it one of the worst phases of FPI outflows in recent years. The surge in U.S. bond yields has redirected global capital towards safer investments, reducing the appeal of riskier emerging markets.
Apart from external factors, domestic headwinds are also playing a role in the market downturn. India’s economic growth has shown signs of slowing, while corporate earnings for the December quarter have largely underwhelmed investors. Elevated stock valuations further contribute to the skepticism, making Indian equities less attractive for fresh FPI inflows.
Global trade tensions have added another layer of uncertainty, as escalating disputes between major economies impact supply chains and investor sentiment. The ripple effect has not only affected India but also other Asian markets, leading to widespread capital outflows.
Despite the bearish trend, domestic institutional investors and retail participants have provided some support, cushioning the market from a deeper plunge. However, sustained foreign selling may continue to weigh on indices unless economic fundamentals improve or global sentiment stabilizes.
While FPIs remain cautious, long-term investors will watch for signs of economic resilience and policy interventions. A turnaround in sentiment could hinge on stabilizing global markets and easing trade tensions.
“Markets are moved by animal spirits, and when fear takes over, logic often follows later.” – John Maynard Keynes
