Foreign Investors Pull Out Billions from Indian Markets: What's Behind the Trend?

Foreign Investors Withdraw Billions from Indian Equities

Foreign investors have pulled out a significant amount of money from Indian stocks, with a total outflow of ₹1.6 lakh crore (USD 18.4 billion) in 2025. In the first two weeks of December alone, they withdrew ₹17,955 crore (USD 2 billion) from Indian equities.

Reasons Behind the Outflow

According to market experts, the main reasons behind this outflow are the sharp depreciation of the Indian rupee and rich Indian valuations. Elevated US interest rates, tighter liquidity conditions, and a preference for safer or higher-yielding developed-market assets have also weighed on investor sentiment.

• Elevated US interest rates make other investments more attractive
• Tighter liquidity conditions reduce the amount of money available for investment
• Preference for safer or higher-yielding developed-market assets leads to a decrease in investment in Indian markets
• Weakness in the Indian rupee makes investments in India less attractive

Impact on Markets

Despite this persistent foreign selling, the impact on markets has been largely offset by strong domestic institutional investor (DII) participation. DIIs invested ₹39,965 crore during the same period, effectively eclipsing FPI outflows.

Looking Ahead

Some market experts believe that the selling pressure may ease in the future. A strong growth and earnings outlook for India could lead to a decrease in FPI selling. Additionally, an expedited US-India trade deal could potentially trigger a reversal in foreign investment trends.

In the debt market, FPIs withdrew ₹310 crore under the general limit but invested ₹151 crore through the voluntary retention route during the same period.