Foreign portfolio investors (FPIs) extended their selling streak in Indian markets, pulling out a net ₹13,028 crore from equities during the week ending December 5, according to data from the National Securities Depository Limited (NSDL). The week saw relentless outflows on four out of five trading days, with only Friday providing a brief respite.
The selling was most intense on Thursday, December 4, when FPIs withdrew ₹4,752.40 crore from equities, marking the heaviest single-day outflow of the week. Wednesday followed closely with net sales of ₹4,033.46 crore, while Monday and Tuesday recorded outflows of ₹3,489.27 crore and ₹846.04 crore, respectively. Friday, December 5, offered a temporary reversal as FPIs turned net buyers with inflows of ₹1,301.07 crore in equities.
“FIIs remained net sellers in Indian equities, extending the cautious trend seen through much of the year,” said Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India. “Through the week, FIIs were net sellers in the Indian equity markets to the tune of $1.32 billion, driven by a combination of global risk-off sentiment, as investors trimmed exposure to emerging markets amid lingering uncertainty over global growth and elevated interest rates in developed markets.”
The rupee’s depreciation emerged as a critical factor influencing foreign investor behaviour. Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, noted, “FIIs are selling now primarily because of the sharp depreciation of the rupee by around 5 per cent this year. It is normal for FIIs to sell and take the money out during times of currency depreciation.” The rupee weakened from 89.4557 per dollar on Monday to 90.1865 by Friday, crossing the psychologically significant 90-mark during the week.
In the debt segment, FPIs displayed mixed behaviour across different categories. The Debt-FAR (Fully Accessible Route) segment witnessed net outflows of ₹1,012.62 crore for the week, with Thursday and Friday recording significant withdrawals of ₹390.25 crore and ₹2,049.71 crore, respectively. However, the Debt-General Limit category attracted net inflows of ₹764.17 crore, primarily driven by Tuesday’s substantial investment of ₹1,501.50 crore through the primary market.
“A weakening rupee, which slipped to fresh lows during this period, further dampened foreign appetite by eroding potential USD-denominated returns,” Srivastava added. “Additionally, relative underperformance of Indian equities versus select global markets and persistent concerns around rich domestic valuations made FIIs more cautious.”
Ross Maxwell, Global Strategy Lead at VT Markets, emphasized valuation concerns. “One of the biggest factors was stretched valuations in Indian equities, particularly in sectors such as financials, consumer and fast-growing mid- and small-cap segments, where valuations had risen far above long-term averages,” he said. “Investors therefore began reallocating toward relatively cheaper markets in search for better value.”
The Debt-VRR (Voluntary Retention Route) segment recorded net outflows of ₹168.58 crore for the week, while hybrid instruments saw marginal net inflows of ₹24.67 crore. Mutual funds attracted modest net investments of ₹162.06 crore across equity, hybrid and other schemes.
Dr. Vijayakumar highlighted the offsetting role of domestic investors. “DIIs have been investing systematically assisted by continuous fund flows, and recently they have been buoyed up by the robust GDP growth numbers and expectations of uptick in corporate earnings, going forward,” he said. “The 25 bp rate cut by the RBI and the proposed huge liquidity infusion have further improved sentiments in favour of the bulls.”
Maxwell pointed to broader macro factors affecting emerging markets. “Elevated bond yields, and USD strength made emerging market equities less attractive. Higher yields on US treasuries offered near risk-free returns, encouraging capital to flow back into developed markets,” he explained.
Looking ahead, market participants expect continued volatility. “In this tug of war between FIIs and DIIs, there will be days of sharp movements in the markets, in response to news and events,” Dr. Vijayakumar said. “For instance, if there is a fair trade deal between India and the US, that can buoy up the sentiments in both equity and currency markets.”
Published on December 6, 2025
