New Delhi: Indian equity markets have witnessed sustained foreign portfolio investor (FPI) outflows in 2025, with overseas investors pulling out funds at an average pace of ₹110 crore per hour, according to a recent market report. The sharp withdrawal reflects heightened global uncertainty, tighter financial conditions, and a shift in investor preference towards safer assets.
The report estimates that FPIs have offloaded tens of thousands of crore rupees from Indian equities so far this year, making 2025 one of the most challenging periods for foreign inflows since the post-pandemic recovery phase. Rising US bond yields, a strong dollar, and lingering concerns over global growth have been key drivers behind the risk-off sentiment.
Key Reasons Behind the Outflows
Market analysts point to multiple factors contributing to the steady exit of foreign capital. Persistent high interest rates in developed economies, particularly the US, have made fixed-income assets more attractive compared to emerging market equities. At the same time, geopolitical tensions and volatility in global commodity prices have added to investor caution.
Valuation concerns have also played a role. After a strong multi-year rally, Indian equities were trading at premium valuations compared to other emerging markets, prompting FPIs to book profits and rebalance portfolios.
Impact on Markets
Despite the heavy FPI selling, Indian markets have shown relative resilience, supported by strong domestic institutional investor (DII) inflows, including mutual funds and insurance companies. This domestic support has helped cushion sharp declines, even as volatility has increased across sectors.
However, analysts warn that sustained foreign outflows could continue to weigh on market sentiment, particularly in export-oriented sectors and large-cap stocks that traditionally attract higher FPI participation.
Outlook
Experts believe FPI flows could stabilise once there is greater clarity on global monetary policy easing, especially signals of interest rate cuts by major central banks. India’s long-term growth prospects, stable macroeconomic fundamentals, and improving earnings outlook remain positive factors that could attract foreign investors back over time.
For now, the report underscores a challenging phase for Indian equities, highlighting the growing divergence between foreign and domestic investor behaviour in shaping market trends in 2025.