FPIs Extend Selling Streak in December
Foreign portfolio investors (FPIs) pulled out ₹11,820 crore from Indian equities during the first week of December, marking a sharp acceleration in capital outflows. The selling comes on the back of a ₹3,765 crore net withdrawal in November, taking the total FPI outflow for 2025 to ₹1.55 lakh crore.
Market participants attribute the renewed selling pressure primarily to the depreciation of the Indian rupee, which has reduced dollar-denominated returns for overseas investors and triggered portfolio adjustments.
Key Factors Behind the Withdrawal
Rupee Depreciation:
A weakening rupee has emerged as a major concern for foreign investors, prompting risk-off positioning and profit protection.
Global Uncertainty:
Unclear signals on interest rate trajectories in developed economies, coupled with geopolitical risks, have dampened appetite for emerging market equities.
Valuation and Risk Rebalancing:
After strong rallies in select segments earlier this year, FPIs appear to be locking in gains and reallocating capital to relatively safer assets.
Market Impact and Investor Sentiment
The persistent FPI selling has added near-term volatility to Indian equity markets, particularly in large-cap stocks with high foreign ownership. However, domestic institutional investors (DIIs) have helped absorb part of the selling pressure, preventing sharper market corrections.
Currency markets have also felt the impact, though India’s foreign exchange reserves and policy interventions continue to provide a stabilising cushion.
Outlook: Caution in the Short Term, Confidence Long Term
Analysts believe FPI flows may remain volatile in the coming weeks, closely tracking rupee movement, global interest rate cues, and macroeconomic data. Despite near-term headwinds, India’s structural growth story, resilient domestic demand, and reform momentum remain intact, keeping long-term investor interest alive.
