Indian equities see Rs 21,000 crore outflow by FPIs

Foreign portfolio investors (FPIs) have withdrawn nearly Rs21,000 crore from Indian equities in the first half of August, pressured by tepid first-quarter earnings, a weakening rupee, and lingering global uncertainties.According to information,FPIs pulled out a net Rs20,975 crore from equities till August 14. This follows a net withdrawal of Rs17,741 crore in July, reversing the positive inflows of Rs38,673 crore between March and June. With the latest pullback, total FPI outflows from equities have touched Rs1.16 lakh crore so far in 2025.
Global uncertainties drive risk aversion
Analysts say the exodus has been fuelled by a confluence of factors, including geopolitical tensions, concerns over US interest rate decisions, and volatility in global trade dynamics.“The sustained outflows are being driven by global uncertainties. Heightened geopolitical tensions and ambiguity surrounding the interest rate trajectory in developed economies, particularly the US, have contributed to a risk-averse sentiment,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India.The recent strength of the US dollar has further dented the appeal of emerging market assets like India, Srivastava added.
Rupee, earnings add to concerns
On the domestic front, the rupee’s weakness and underwhelming earnings season have weighed heavily on investor sentiment. “Muted earnings growth and elevated valuations have contributed to the outflow,” noted VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.The IT sector bore the brunt of the selling, with sustained FPI outflows dragging down the IT index. In contrast, banking and financial stocks have shown resilience, supported by fair valuations and continued institutional buying.
Outlook mixed despite positives
Market experts say upcoming developments on the tariff front could influence FPI flows. The easing of US-Russia tensions and the absence of new sanctions indicate that the proposed 25 per cent secondary tariff on India is unlikely to materialise after August 27 — a positive for Indian equities.“Also, S&P’s upgrade of India’s sovereign credit rating from BBB- to BBB may provide a further boost to FPI sentiment,” said Vaqarjaved Khan, CFA, Senior Fundamental Analyst at Angel One.Meanwhile, FPIs showed selective interest in debt markets, investing Rs4,469 crore under the debt general limit and Rs232 crore via the voluntary retention route during the same period.Despite these positives, analysts caution that global headwinds, particularly uncertainty around US monetary policy, will continue to dictate FPI behaviour in the near term.

(Business Correspondent)