Foreign Portfolio Investors (FPIs) continue to offload Indian equities at a rapid pace in January, with net outflows totaling ₹64,156 crore as of January 24, according to data from depositories.
The escalation in outflows in recent weeks can be attributed to the strengthening of the dollar and the increase in US bond yields following Donald Trump’s election as US President.
This month’s FPI net selling stands in stark contrast to net purchases of ₹15,448 crore seen in December 2024. In October and November 2024, FPIs sold equities worth ₹94,017 crore and ₹21,612 crore respectively.
FPIs have been consistent net sellers in equities throughout January, with the exception of January 2. The trend continued into the past week, marking the fourth consecutive week of FPIs remaining net sellers. In the debt markets, FPIs also continued to be net sellers, albeit at a lower level of ₹7,500 crore as of January 24.
In 2024, FPIs made marginal net investments in Indian equities amounting to ₹427 crore, a significant decrease from the net investments of ₹1,71,107 crore in 2023.
According to K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the unabated FPI selling is driven by the sustained strength of the dollar and the rise in US bond yields. He predicts that as long as the dollar index remains above 108 and the 10-year US bond yield remains above 4.5 per cent, the selling pressure is likely to persist.
Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment Research India, noted that the exodus of foreign investments from the Indian equity markets continues. So far in 2025, FPIs have sold net assets worth $7.44 billion, influenced by both global and domestic factors.
The persistent depreciation of the Indian rupee, high valuations of Indian equities, lackluster earnings season expectations, and macroeconomic challenges are contributing to FPIs’ cautious approach. Additionally, uncertainty surrounding Trump’s policies is prompting investors to stay away from riskier investments.
Meanwhile, the appeal of Indian debt has diminished for FPIs due to a stronger US dollar and increasing US bond yields. Despite India’s inclusion in JP Morgan’s Global Emerging Market Government Bond Index last year, FPIs have started 2025 with a shift towards safer US assets, offloading government bonds worth ₹7,500 crore as of January 24.
Experts in the fixed income market and economists believe that the global bond inclusion narrative for India remains intact, but the current market conditions are favoring US assets over Indian debt.
