Foreign investors withdrew Rs 12,257 crore ($1.4 billion) from Indian equities in the first week of September, influenced by a stronger dollar, concerns over US tariffs, and ongoing geopolitical tensions. This withdrawal followed significant net outflows of Rs 34,990 crore in August and Rs 17,700 crore in July. Thus far in 2025, the total outflow from Foreign Portfolio Investors (FPIs) in equities has reached Rs 1.43 lakh crore, according to data from depositories. Looking ahead, FPI flows will likely be influenced by commentary from the US Federal Reserve, US labor market data, expectations for rate cuts from the Reserve Bank of India, and its stance on rupee stability, noted Vaqarjaved Khan, Senior Fundamental Analyst at Angel One.
Although short-term volatility may continue, India’s long-term growth prospects, policy reforms like GST rationalization, and anticipated earnings recovery could attract FPIs back once global uncertainties diminish, according to Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment. Market analysts suggest that a mix of global and domestic factors has driven the recent withdrawals. Srivastava pointed out that the stronger dollar, renewed US tariff threats, and persisting geopolitical tensions contributed to a risk-off sentiment. Domestically, concerns over slowing corporate earnings and high valuations—where Indian equities are trading at a premium compared to other emerging markets—have led FPIs to secure profits and reduce their exposure.
Khan echoed this sentiment, attributing the selloff to US tariff tensions, a weak rupee, and a global risk-off climate. However, the government’s GST rate rationalization and robust first-quarter GDP growth of 7.8% provided some cushioning. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, mentioned that substantial domestic institutional investor buying allows FPIs to cash in at high valuations and invest in more affordable markets like China, Hong Kong, and South Korea. Additionally, during the review period, FPIs invested Rs 1,978 crore in the debt general limit while withdrawing Rs 993 crore in the debt voluntary retention route.
