Foreign Portfolio Investors (FPIs) continued their equity selling spree in the first week of March 2025, net selling ₹24,753 crore in five trading sessions this past week as of March 7, taking the total outflows so far this calendar year to ₹1,37,354 crore, depositories data showed.
The past week marked the 13th consecutive week of net FPI outflows, even as India’s equity benchmarks recorded their highest weekly gains of 2025. FPIs continued to adopt a cautious stance amid prevailing global uncertainties and domestic challenges.
The pace of FPI selling have however moderated in last few sessions, indicating that they may have toned down their pessimism in an oversold Indian equity market, according to capital market experts.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said FPI selling in India continued into early March, though there are signs of a slight decline in intensity over the past few days.
There is big buying in Chinese stocks triggered by attractive valuations and expectations from the recent positive initiatives by the Chinese government towards their big businesses, he said.
“The rally in Chinese stocks have resulted in the Hang Seng Index performing exceedingly well with YTD return of 23.48 per cent as against -5 per cent YTD return in Nifty. This is more likely to be a short-term cyclical trade since Chinese corporate earnings have continuously disappointed since 2008”, Vijayakumar added.
The recent decline in the dollar index will limit the fund flows to the US, he said.
“Trump’s tariff threats have changed the focus of investors choice towards domestic consumption driven sectors like financials, telecom, hotels and aviation and away from externally linked sectors. This trend is volatile like Trump’s tariff policy”, Vijayakumar added.
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Since December 13, 2024, FPIs have sold net investments worth $17.1 billion from the Indian equity markets. The equity markets continued to remain on the edge amidst US President Donald Trump’s on-and-off tariff policy, awaiting the nitty gritty of the new ‘reciprocal’ tariff regime set to commence on April 2.
FPIs had pulled out ₹34,574 crore from the equities market in February 2025, marking the second consecutive month of net FPI outflows, following a ₹78,027 crore withdrawal in January 2025.
Himanshu Srivastava, Associate director – Manager Research, Morningstar Investment, said that Imposition of higher tariffs by US on countries like Mexico, Canada and China along with reciprocal tariff on several countries including India has dented market sentiments. This has reignited fears of a potential global trade war, which could potentially impact global economy as well, thereby prompting FPIs to re-evaluate their exposure to emerging markets, including India, he added.
Srivastava said this sustained selling by foreign investors is due to a combination of both – global and domestic factors. A major catalyst continues to be the escalation in global trade tensions, which significantly weigh on investor sentiment. Imposition of higher tariffs by US on countries like Mexico, Canada and China along with reciprocal tariff on several countries including India has dented market sentiments.
This has reignited fears of a potential global trade war, which could potentially impact global economy as well, thereby prompting FIIs to re-evaluate their exposure to emerging markets, including India, he added.
Vaibhav Porwal, Co-Founder, Dezerv, said the FPI outflows signal all-around selling, with these investors consistently offloading significant amounts over the past six months.
India is undergoing a market correction, with all major equity indices falling by approximately 11 percent -25 percent. US bonds currently offer attractive yields without the volatility or currency risk associated with emerging market equities. In addition, US interest rates have risen, he said.
Additionally, the 3 per cent rupee depreciation has eroded returns for FPIs. Moreover, India levies taxes of 12.5 percent on long-term and 20 per cent on short-term capital gains for FPIs, whereas alternative markets offer zero or lower tax environments, Porwal noted.
“These factors may have incentivized FIIs to allocate funds where they find valuation comfort and prompted them to reallocate investments to markets offering potentially better returns, such as China, the US, Brazil, or Thailand”, he said