FPIs withdraw record Rs 1.60 lakh crore from Indian equities in 2025
Foreign Portfolio Investors (FPIs) withdrew a record Rs 1.60 lakh crore from Indian equities in 2025, surpassing the previous record outflow of Rs 1.21 lakh crore in 2022. This massive withdrawal was attributed to global headwinds, stretched valuations, and currency volatility. Despite the outflow in equities, FPIs invested Rs 59,000 crore in Indian debt markets. The equity sell-off was concentrated in sectors like IT, FMCG, Power, Consumer Durables, and Healthcare. Market experts anticipate a sustainable turnaround in FPI flows during 2026, driven by expected earnings recovery and policy reforms.
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Foreign Portfolio Investors (FPIs) withdrew a record Rs 1.60 lakh crore from Indian equities in 2025, marking the largest outflow in history as global headwinds, stretched valuations, and currency volatility dampened investor sentiment. Despite this unprecedented exodus, market participants expect flows to turn sustainably positive in 2026 driven by earnings recovery and policy reforms.
Record Outflows Amid Global Pressures
The massive withdrawal surpassed the previous record outflow of Rs 1.21 lakh crore in 2022, making 2025 the worst year for equity flows. This came after a marginal net inflow of just Rs 427 crore in 2024, contrasting sharply with the robust Rs 1.71 lakh crore equity investment seen in 2023.
| Parameter | 2025 Performance |
|---|---|
| Equity Outflows | Rs 1.60 lakh crore |
| Debt Inflows | Rs 59,000 crore |
| Selling Months | 8 out of 12 months |
| Buying Months | April, May, June, October |
Rising US bond yields, a stronger dollar, and geopolitical uncertainties tilted global capital towards developed markets. "Persistently high US interest rates and elevated bond yields improved risk-free returns in developed markets, prompting capital rotation," said Himanshu Srivastava, principal manager-research at Morningstar Investment Research India.
Global Market Performance Disparity
The performance gap between Indian markets and global indices justified FPI investment decisions, with the rupee's depreciation further reducing dollar returns for foreign investors.
| Market | Index | YTD Returns |
|---|---|---|
| Republic of Korea | Kospi | 66.51% |
| Hong Kong | Hang Seng | 30.92% |
| Japan | Nikkei 225 | 25.95% |
| Brasil | BOVESPA | 25.64% |
| Germany | DAX | 21.29% |
| USA | Nasdaq | 20.84% |
| Great Britain | FTSE 100 | 19.82% |
| China | Shanghai Composite | 18.81% |
| USA | S&P 500 | 16.46% |
| USA | Dow Jones | 13.55% |
| France | CAC 40 | 10.25% |
| India | Sensex | 5.68% |
Sectoral Flows and Investment Patterns
FPI selling was concentrated in key growth sectors, with financial services and IT experiencing the heaviest outflows amid concerns over US growth and weak capex cycles. The primary sectors experiencing outflows included Information Technology, FMCG, Power, Consumer Durables, and Healthcare. However, healthcare, utilities, and manufacturing attracted inflows based on long-term infrastructure and PLI-led manufacturing themes.
FPIs maintained maximum exposure to the banking, financial services and insurance sector while being only marginal sellers in this space, aligning with its significant market weightage.
Debt Market Preference and FAR Inclusion
In contrast to equity outflows, FPIs invested Rs 59,000 crore in Indian debt markets, driven by India's inclusion in global bond indices and attractive yield differentials. The phased inclusion of Indian government bonds under the Fully Accessible Route in indices such as the JP Morgan Global Emerging Markets Index created steady demand from passive funds.
"FPIs probably booked gains in the equity markets and rotated some of it into the debt FAR to lock-in the relatively higher interest rates," said Vikas Gupta, CEO and chief investment strategist at OmniScience Capital.
2026 Recovery Outlook
Market experts anticipate a sustainable turnaround in FPI flows during 2026. "We expect FPIs to return sustainably in India as nominal growth and earnings pick up. Closure of the trade deal with the US should narrow tariff differentials, while Fed rate cuts will keep the dollar soft, favouring emerging-market assets," said Garima Kapoor, deputy head of research and economist at Elara Securities India.
Domestic factors including Indian earnings growth relative to peers, policy continuity, and reforms around the Union Budget could act as key triggers for revival. The equity sell-off was cushioned by strong domestic institutional investor buying, supported by rising SIP inflows from retail investors who continued channeling liquidity into Flexi cap, Midcap and Small cap funds.
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