Foreign investors have withdrawn over ₹23,710 crore from the Indian equity markets so far this month, which has pushed the total outflows to exceed ₹1 lakh crore in 2025 due to increasing global trade tensions. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, suggests that foreign portfolio investment (FPI) in India is likely to rebound with the revival of economic growth and corporate earnings, which could occur in two to three months.
According to depository data, FPIs have sold shares amounting to ₹23,710 crore from Indian equities in the current month up to February 21. This follows a net outflow of ₹78,027 crore in January. Overall, FPI outflows have totaled ₹1,01,737 crore in 2025 so far, as reported by the depositories.
This significant sale has led to the Nifty delivering negative returns of 4% year-to-date. Market apprehensions have increased following reports that the US President, Donald Trump, is contemplating new tariffs on steel and aluminum imports, as well as reciprocal tariffs on several countries, according to Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India.
These developments have reignited fears of a possible global trade war, prompting FPIs to reassess their exposure to emerging markets, including India, Srivastava added. Domestically, disappointing corporate earnings and continuous depreciation of the Indian rupee, which has reached multi-year lows, have further reduced the attractiveness of Indian assets, Srivastava noted. Following Trump’s win in the US presidential elections, US markets have been drawing substantial capital inflows globally. However, China has recently become a significant destination for portfolio flows, according to Vijayakumar from Geojit Financial Services. The Chinese president’s new initiatives with leading businessmen have raised hopes for economic growth recovery in China.
Vijayakumar added that as Chinese stocks remain inexpensive, the ‘Sell India, Buy China’ trend could persist. Nonetheless, this trade has occurred previously and typically fades out soon due to structural constraints on China’s economic revival.
Additionally, FPIs have withdrawn funds from the debt market, pulling out ₹7,352 crore from the debt general limit and ₹3,822 crore from the debt voluntary retention route. The overall trend demonstrates a cautious stance by foreign investors, who significantly reduced their investments in Indian equities in 2024, registering net inflows of merely ₹427 crore. This starkly contrasts with the substantial ₹1.71 lakh crore net inflows in 2023, fueled by optimism regarding India’s robust economic fundamentals, compared to 2022, which saw a net outflow of ₹1.21 lakh crore due to aggressive global central bank rate hikes.