Foreign Portfolio Investors (FPIs) remained on a selling spree in the first week of March 2025, with a net outflow of ₹24,753 crore in five trading sessions as of March 7. This brings the total outflows for the year to ₹1,37,354 crore, according to data from depositories.
Despite India’s equity benchmarks recording their highest weekly gains of the year, FPIs continued to sell off their holdings, marking the 13th consecutive week of net outflows. However, the pace of selling has slightly moderated in recent sessions, indicating a potential shift in sentiment among FPIs.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPI selling in India persisted into early March, but there are signs of a slight decline in intensity. He attributed this to a surge in buying activity in Chinese stocks driven by attractive valuations and positive government initiatives.
However, Vijayakumar cautioned that the rally in Chinese stocks may be short-lived due to ongoing concerns about Chinese corporate earnings. He also pointed out that the recent decline in the dollar index could limit fund flows to the US, leading investors to explore other markets like India.
The imposition of higher tariffs by the US on countries like Mexico, Canada, and China, as well as reciprocal tariffs on several countries including India, has weighed on market sentiment. Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment, highlighted that these trade tensions have prompted FPIs to reassess their exposure to emerging markets like India.
Srivastava explained that the sustained selling by foreign investors is a reflection of both global and domestic factors. The fear of a global trade war and its potential impact on the global economy has led FPIs to reconsider their investments in emerging markets.
Vaibhav Porwal, Co-Founder of Dezerv, noted that FPI outflows indicate a broader trend of selling across various sectors. Investors have been reallocating their funds to markets like China, the US, Brazil, or Thailand, where they see better potential returns.
In conclusion, the persistent FPI outflows in India are a result of various factors such as global trade tensions, currency depreciation, and tax implications. Despite the recent moderation in selling pressure, the market remains cautious as investors navigate through uncertain times.
