Foreign Investors Pull Out Billions from Indian Stocks
Foreign investors have withdrawn a massive Rs 17,955 crore (USD 2 billion) from Indian equities in the first two weeks of December, taking the total outflow to Rs 1.6 lakh crore (USD 18.4 billion) in 2025. This sharp withdrawal follows a net outflow of Rs 3,765 crore in November, extending the pressure on domestic equity markets.
What's Driving the Outflow?
Market experts attribute this sustained outflow to several factors, including the sharp depreciation of the 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.
- Rupee depreciation: The Indian rupee has been under pressure, making it less attractive for foreign investors.
- Rich valuations: Indian equities are considered overvalued compared to other emerging markets.
- Global portfolio rebalancing: Investors are rebalancing their portfolios, leading to a shift away from Indian stocks.
- Macroeconomic uncertainty: Global economic uncertainty is also contributing to the outflow.
A Silver Lining?
Despite this persistent foreign selling, the impact on markets has been largely offset by strong domestic institutional investor (DII) participation. DIIs invested Rs 39,965 crore during the same period, effectively eclipsing FPI outflows.
Looking ahead, some market experts believe the selling pressure may ease. A strong growth and earnings outlook for India could lead to a decline in FPI selling. Additionally, an expedited US-India trade deal could potentially trigger a reversal in foreign investment trends.
Debt Market Trends
In the debt market, FPIs withdrew Rs 310 crore under the general limit but invested Rs 151 crore through the voluntary retention route during the same period.
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