Foreign Portfolio Investors (FPIs) sold off Indian equities worth nearly ₹21,000 crore in the first half of August 2025, contributing to a cumulative outflow of ₹1.16 lakh crore for the year, according to depository data. The heavy selling, reported on August 17, 2025, was driven by escalating US-India trade tensions, lackluster first-quarter corporate earnings, and a weakening Indian rupee, which have collectively dampened investor confidence in Indian markets.
The sell-off follows a net withdrawal of ₹29,975 crore from equities up to August 14, after ₹17,741 crore was pulled out in July. This marks a stark contrast to the ₹38,673 crore invested by FPIs between March and June 2025. Analysts attribute the outflows to global uncertainties, including geopolitical tensions and ambiguity around US interest rate policies, which have fostered a risk-averse sentiment.
“The strengthening US dollar reduces the attractiveness of emerging market assets like India’s,” said Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India. Additionally, tepid earnings growth and high valuations have further fueled the exodus, noted VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
Sectorally, the IT index has been hit hard by sustained FPI selling, while banking and financial stocks have shown resilience due to fair valuations and domestic institutional buying. Meanwhile, FPIs invested ₹4,469 crore in the debt general limit and ₹232 crore in the debt voluntary retention route during the same period.
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Despite the gloom, there are glimmers of hope. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, highlighted that easing US-Russia tensions and the unlikelihood of a proposed 25% secondary tariff on India after August 27 could stabilize markets. Furthermore, S&P’s recent upgrade of India’s credit rating from BBB- to BBB is expected to bolster FPI sentiment.
However, the trajectory of FPI activity will hinge on developments in global trade and tariff policies, with analysts cautioning that market volatility may persist until these uncertainties subside.
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