Amidst uncertainty surrounding the India-US trade deal and sharp depreciation of the rupee, foreign investors have withdrawn ₹17,955 crore (USD 2 billion) from Indian equities so far in December, according to data from the National Securities Depository Ltd (NSDL).
Following a net outflow of ₹3,765 crore in November, this takes the total outflow of foreign investments in Indian equities this year to ₹1.6 lakh crore (USD 18.4 billion).
The current trend comes after a brief pause in October, when Foreign Portfolio Investors (FPIs) infused ₹14,610 crore, snapping a three-month streak of heavy withdrawals. In September, FPIs sold equities worth ₹23,885 crore; in August, ₹34,990 crore; and in July, ₹17,700 crore.
Market experts have attributed this sustained outflow to a sharp depreciation of the rupee and rich Indian valuations, and said it further extended pressure on domestic equity markets.
Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, said elevated US interest rates, tighter liquidity conditions, and a preference for safer or higher-yielding developed-market assets have weighed on investor sentiment.
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“Adding to the pressure, India’s relatively rich equity valuations have made it less attractive compared to other emerging markets that currently offer better value,” he added.
Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, pointed to lingering macroeconomic uncertainty along with weakness in the Indian rupee, global portfolio rebalancing and year-end effects as key reasons behind the continued pullout.
However, despite this persistent foreign selling, the impact on markets has been largely offset by strong domestic institutional investor (DII) participation, which invested ₹39,965 crore during the same period, thereby effectively eclipsing FPI outflows.
Looking ahead, some market experts believe the selling pressure may ease, especially in the event of an expedited US-India trade deal.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that sustained selling appears unsustainable given India’s strong growth and earnings outlook, suggesting that FPI selling is likely to decline going forward.
Meanwhile, in the debt market, FPIs withdrew ₹310 crore under the general limit but invested ₹151 crore through the voluntary retention route during the same period.
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