Foreign Investors Sell Indian Stocks Worth ₹18,000 Crore in December, But Local Investors Step In

Foreign Portfolio Investors Resume Selling Streak in December

Foreign portfolio investors have started selling Indian stocks again in December, pulling out nearly ₹18,000 crore from the market. However, the impact on the main stock market indices has been limited, thanks to domestic institutional investors (DIIs) who have bought stocks worth almost twice the amount sold by foreign investors.

DIIs Absorb FPI Sell-Off

According to data from the National Securities Depository Limited (NSDL), foreign portfolio investors have sold ₹17,955 crore worth of Indian stocks in the first nine trading sessions of December. In the same period, domestic institutional investors, including mutual funds, have bought stocks worth ₹36,101 crore. This has taken their total investment in the market to a record ₹7.44 lakh crore in 2025.

Rupee Slump Drives FPI Selling

The main reason for foreign investors to sell Indian stocks again is the sharp fall in the value of the Indian rupee. The rupee has lost 6% of its value against the US dollar in 2025, falling to 90.56. This makes it the worst-performing currency in Asia.

The fall in the rupee's value is largely due to steep US tariffs of up to 50% on Indian goods, which have hurt exports to the US, India's biggest market. A weak rupee reduces the dollar value of foreign investments in India and increases the risk, prompting foreign investors to look for safer and more stable returns elsewhere.

FPIs on Track for Worst Year of Equity Selling

Foreign portfolio investors have withdrawn a net amount of ₹1.61 lakh crore from Indian stocks in 2025, making it the worst year for equity selling. According to NSDL data, foreign investors have been net sellers in eight out of the last 11 months.

DIIs Drive Market Growth

On the other hand, domestic institutional investors have been aggressive buyers of Indian stocks in 2025. They started the year with investments of ₹86,591 crore in January and have continued to buy stocks throughout the year. While their investments slowed down in March and April, they picked up pace again in May and June.

Future FPI Flows Expected to be Volatile

Experts believe that foreign investor flows into the Indian market are expected to remain volatile. Shrikant Chouhan, Head of Equity Research at Kotak Securities, said that global equity markets have already priced in a 25-basis-point cut in the Federal Funds rate by the US Federal Reserve. He also noted that primary market activity in India continues to remain robust, despite volatile foreign investor flows.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said that it would be difficult for foreign investors to continuously sell Indian stocks and maintain high short positions in a market supported by strong systematic investment plan (SIP) inflows. He added that the rupee's depreciation, sustained foreign investor selling, and delays in finalizing the US-India trade deal are all temporary drags on the market.

The most important factor that will dictate the direction of the market is earnings growth, which looks promising for FY27. Sustained selling in India when growth and earnings prospects are strong is not a sustainable strategy, and this could eventually lend support to the market.