Foreign investors have continued to pull out funds from Indian equities as US tariff woes mount and the dollar gets stronger.
In the first week of September, Foreign Portfolio Investors (FPIs) withdrew ₹12,257 crore (USD 1.4 billion) amid persistent geopolitical tensions, data with the depositories revealed.
This came following a net outflow of ₹34,990 crore in August and ₹17,700 crore in July, bringing the total outflow by FPIs in equities to ₹1.43 lakh crore so far in 2025.
Trade analysts are expecting FPI outflows to increase in the coming week in the backdrop of US Fed commentary and US labour market data coming in, along with the Reserve Bank of India’s (RBI) rate cut expectations and its take on the rupee’s stability.
"While near-term volatility may persist, India's structural growth story, policy reforms, such as GST rationalisation, and expectations of an earnings revival could bring FPIs back once global uncertainties ease," said Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment.
Also Read: Biggest FPIs' sell-out in 6 months, ₹35,000-cr pulled out in Aug
Outflows in the last few months were triggered by a combination of global and domestic factors, believe market experts, from slower corporate earnings to concerns over high valuations.
"Multiple factors contributed to this risk-off sentiment – a stronger dollar, renewed US tariff threats, and continuing geopolitical tensions added to global uncertainty. Indian equities continue to trade at a premium to other emerging markets, which prompted FPIs to book profits and reduce exposure, " Srivastava added.
Simultaneously, a weak rupee and global risk-off sentiment led to the selloff and the sentiment was cushioned by the rationalisation of GST rates by the government and healthy first quarter GDP data of 7.8 per cent.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said that sustained massive DII buying is enabling FPIs to encash at high valuations and take the money to cheaper markets, such as China, Hong Kong, and South Korea.
On the other hand, FPIs invested ₹1,978 crore in the debt general limit and withdrew ₹993 crore in the debt voluntary retention route during the period under review.
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