Foreign portfolio investors (FPIs) continued to be net sellers of Indian equities in September, withdrawing ₹23,885 crore (approximately $2.7 billion) and bringing the total year-to-date outflow to ₹1.58 lakh crore ($17.6 billion). This trend marks the third consecutive month of withdrawals, following significant outflows of ₹34,990 crore in August and ₹17,700 crore in July, as reported by depositories.
The recent selling trend has been attributed to several factors, including trade and policy uncertainties from the U.S. A notable concern is the steep tariff increases of up to 50% on Indian goods and a new $100,000 fee for one-time H-1B visas, which negatively impacted sentiment in export-oriented sectors, particularly in information technology (IT). Himanshu Srivastava, Principal at Manager Research, Morningstar Investment Research India, highlighted that these developments, alongside the rupee’s decline to a record low and high valuations of Indian equities, contributed to the investors’ shift toward other Asian markets.
Despite the ongoing sell-off, some analysts suggest that conditions could eventually improve for India. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, pointed out that valuations have become more attractive, and potential policy changes, such as reduced GST rates and an expansionary monetary stance, could rekindle foreign interest. “India remains the fastest-growing major economy globally,” Khan noted, emphasizing that the forthcoming earnings season and macroeconomic data will be critical in determining FPI flows in the near future.
Echoing these sentiments, Srivastava stated that a sustained turnaround in FPI investment will depend on clarity regarding tariffs, currency stabilization, improved earnings visibility, and a favorable global interest rate environment. Should these elements improve, India’s robust structural growth narrative could selectively attract foreign investors once again.
In contrast, the debt markets experienced net inflows, with FPIs investing approximately ₹1,085 crore under the general limit and ₹1,213 crore through the voluntary retention route in September. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that FPIs shifting funds from India to other markets has so far provided better returns, as Indian equities have underperformed most global counterparts over the past year, with one-year returns remaining in negative territory.
Published on October 5, 2025.
