Foreign Portfolio Investors (FPIs) maintained their selling momentum for the sixth consecutive session on Tuesday, offloading Indian equities worth ₹3,844.02 crore according to provisional data from the National Stock Exchange (NSE). This sustained outflow reflects continued foreign investor caution as the year draws to a close.

Recent FPI Activity Trends

The Tuesday sell-off follows Monday's equity disposal worth ₹2,759.89 crore, indicating accelerating outflow pressure. The previous week witnessed consistent FPI selling exceeding ₹4,500 crore, marking a sharp reversal from the week prior when overseas investors were net buyers for three consecutive sessions.

Year-to-Date FPI Outflows

According to National Securities Data Ltd. (NSDL), FPIs have net offloaded Indian equities worth ₹1.62 lakh crore in 2025. The selling pressure intensified significantly in August, with FPIs disposing shares worth over ₹35,000 crore. Analysts primarily attribute this major exodus to the decline in the rupee's value, which has dampened foreign investor sentiment.

Domestic Investor Response

In stark contrast to foreign selling, domestic institutional investors (DIIs) demonstrated year-end optimism by purchasing equities worth ₹6,159.81 crore. The DIIs have maintained their net buying stance for approximately 50 sessions, providing crucial market support amid sustained FPI outflows.

Market Performance Overview

Despite the selling pressure, Indian equity indices showed resilience with marginal declines. The Nifty 50 dropped 3.25 points or 0.01% to close at 25,938.85, while the Sensex fell 20.46 points or 0.02% to end at 84,675.08.

Sectoral Highlights

The Nifty Metal index emerged as the session's standout performer, surging 2.00% to achieve a fresh all-time high of 11,029. PSU Banks and Auto sectors also attracted buying interest, providing cushion against FPI selling and year-end market lethargy. Conversely, IT, Realty, and Consumer Durables sectors faced profit-booking pressure.

The sustained FPI selling streak underscores ongoing foreign investor concerns about Indian market valuations and currency stability, while robust domestic institutional support continues to provide market stability during this challenging period.

The Indian stock market witnessed unprecedented institutional activity in 2025, with Foreign Institutional Investors (FIIs) recording their highest-ever annual outflow of ₹1.54 lakh crore while Domestic Institutional Investors (DIIs) provided crucial support with record inflows of ₹7.7 lakh crore. This dramatic shift in institutional behavior marked a historic milestone as domestic ownership of Indian companies surpassed foreign investors for the first time in March, with the gap continuing to widen throughout the year.

Record Foreign Outflows Driven by Multiple Factors

The massive FII exodus represents the highest calendar year selling on record, driven by a combination of factors including slowing economic growth, expensive valuations, and a declining rupee that exacerbated risk-off sentiment among global investors. The selling pressure was particularly intense, with FIIs remaining net sellers in seven months while turning buyers in only five months during 2025.

"Foreign selling in Indian equities can be attributed to global investors preferring other markets on a relative basis," said Sriram Velayudhan, senior vice president, IIFL Capital Services. "Factors like lacklustre earnings, tariff overhang and a weak currency, apart from valuations, kept them away."

Domestic Institutions Emerge as Market Stabilizers

Domestic Institutional Investors, led by pension schemes and mutual funds benefiting from robust retail investor participation, demonstrated remarkable resilience throughout the year. Equity mutual funds alone received net flows of ₹3.22 lakh crore, supporting both secondary market stability and the booming IPO market that raised an unprecedented ₹1.75 lakh crore.

"The unprecedented SIP (systematic investment plan) inflows this year have supported the weak markets despite the aggressive foreign sell-off," noted Velayudhan. The sustained domestic buying helped Indian markets achieve modest gains, with the Sensex advancing 9.70% and Nifty gaining 8.40% to briefly touch all-time highs.

Market Performance and Global Comparison

Despite the positive returns, Indian markets underperformed several Asian and emerging market peers, including China, Brazil, and Taiwan, which gained between 26% and 34% during the same period. "Overall, they remained bearish on India as it was the worst-performing market in Asia," said Siddarth Bhamre, head of research, Asit C Mehta Intermediates.

Outlook for 2026

Market experts anticipate a potential reversal in FII behavior for 2026, with the quantum of selling expected to ease significantly. "Historically, periods of high foreign selling were followed by them turning buyers and the same can't be ruled out in 2026," said Velayudhan. Factors such as a potential India-US trade deal and rupee recovery could catalyze foreign investor returns, though experts expect any buying to be gradual rather than aggressive.