Foreign portfolio investors (FPIs) have pulled out ₹64,156 crore from the Indian equities market in January 2025, marking a continued trend of withdrawal due to the depreciation of the rupee, increasing US bond yields, and expectations of a lackluster earnings season, as reported by PTI.
This selling trend indicates a significant shift in investor sentiment compared to December 2024, when FPIs invested ₹15,446 crore in Indian equities during that month, according to depository data.
Global and Domestic Challenges Impact Sentiment
The report highlighted that the change in sentiment is attributed to global and domestic challenges.
“The ongoing depreciation of the Indian rupee is placing considerable strain on foreign investors, prompting them to withdraw funds from the Indian equity markets,” stated Himanshu Srivastava, Associate Director, Manager Research at Morningstar Investment Advisers India, in an interview with PTI.
Additionally, the elevated valuations of Indian equities, despite recent market corrections, along with expectations of a subdued earnings season and broader macroeconomic challenges, are causing investors to be more cautious, he noted.
Furthermore, Donald Trump’s unpredictable policies have led investors to adopt a more conservative approach, avoiding riskier investment options, he added.
What Do the Figures Indicate?
Data reveals that FPIs have sold shares worth ₹64,156 crore from Indian equities up to January 24. They have been net sellers on every day this month, except January 2.
“The persistent strength of the dollar and the rise in US bond yields are the main drivers behind the FII selling. As long as the dollar index remains above 108 and the 10-year US bond yield stays above 4.5 percent, this selling trend is expected to persist,” commented V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Given the attractiveness of US bond yields, FPIs have also been active sellers in the debt market, withdrawing ₹4,399 crore from the debt general limit and₹5,124 crore from the debt voluntary retention route.
Foreign investors have adopted a more cautious stance, significantly reducing their investments in Indian equities in 2024, resulting in net inflows of only ₹427 crore. This starkly contrasts the remarkable net inflows of ₹1.71 lakh crore recorded in 2023, which were fueled by positive sentiment surrounding India’s robust economic fundamentals. In comparison, 2022 experienced a net outflow of ₹1.21 lakh crore, largely due to the aggressive interest rate increases implemented by global central banks.
