Global uncertainties and ambiguity surrounding the trade climate have driven outflow by Foreign Portfolio Investors (FPIs) in Indian equities to the tune of ₹21,000 crore in the first half of August.
With this, the total outflow in equities reached the ₹1.16 lakh crore mark so far in 2025, according to data with the depositories.
While FPI activity will be driven by the outcome of tariff talks with the US, other factors influencing foreign investors include first-quarter corporate earnings, which have been rather lacklustre, and a weakening rupee.
Despite a fresh surge of confidence in traders following a relative easing of tensions between the US and Russia, it remains to be seen how the discussions with Ukraine unfold in the coming weeks, and whether they will help bring more peace and stability in the region.
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For now, it seems like the proposed secondary tariff of 25 per cent that had been announced by US President Donald Trump on Indian imports may hold off – a clear positive sign for the market, said Vaqarjaved Khan, CFA - Senior Fundamental Analyst, Angel One.
Additionally, market rating agency, S&P Global, upgraded India’s credit rating from BBB- to BBB, a move that could further boost FPIs’ sentiment, he added.
From March to June, FPIs invested ₹38,673 crore in Indian equities, followed by a net withdrawal of ₹17,741 crore in July.
Until August 14, they withdrew a net sum of ₹20,975 crore, according to the depositories data.
"The sustained outflows are being driven primarily by a confluence of global uncertainties. Heightened geopolitical tensions and ambiguity surrounding the interest rate trajectory in developed economies, particularly the United States, have contributed to a risk-averse sentiment," observed Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India.
Adding to this caution is the recent strengthening of the US dollar, which tends to reduce the relative attractiveness of emerging market assets like India's, he noted.
Tepid corporate earnings in the first quarter and elevated valuations have also contributed to the outflow, opined VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Sectorally, there has been sustained selling in IT stocks, leading to pulling down of the IT index. However, banking and financials continue to be relatively resilient due to fair valuations and institutional buying.
On the other hand, FPIs invested ₹4,469 crore in the debt general limit, and pumped ₹232 crore into the debt voluntary retention route during the period under review.
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