India’s foreign direct investment (FDI) inflows increased 17.2% year-on-year to $94.5 billion in 2025-26, aided by overseas investor interest despite global macroeconomic uncertainty and volatile capital flows, according to the Reserve Bank of India’s latest monthly bulletin.

Gross FDI inflows stood at $94.5 billion in 2025-26 compared with $80.6 billion in the previous year, while net FDI inflows increased sharply to $7.7 billion from $1 billion a year ago.

“On the capital account, gross FDI has been encouraging,” the RBI said, adding that inflows are expected to remain robust amid a recent wave of greenfield investment announcements, particularly in the finance and technology sectors.

The central bank said that March marked the second consecutive month of positive net FDI inflows, despite moderation in gross inflows, aided by lower repatriation and outward FDI. Outward FDI also eased in March, with more than half of the investments directed towards Singapore, the UAE and the Netherlands.

Meanwhile, external commercial borrowings moderated to $43 billion in 2025-26 from $61.2 billion a year earlier, as Indian companies turned cautious on overseas borrowings amid elevated global interest rates and relatively attractive domestic funding conditions.

The RBI also flagged continued pressure from foreign portfolio investor (FPI) outflows. FPIs remained net sellers in April and May amid geopolitical tensions and uncertainty in West Asia, with cumulative outflows of about $10 billion so far in 2026-27, largely from equities.

Markets regulator Sebi board is set to meet on Monday to deliberate on a wide-ranging agenda, including a proposal to ease fund settlement norms for foreign portfolio investors (FPIs), and changes to regulatory frameworks for market intermediaries, people familiar with the matter said.

A key item on the agenda is a proposal to allow Foreign Portfolio Investors (FPIs) to net funds for same-day cash market trades, instead of settling each trade individually.

Under the existing framework, an FPI needs to settle equity cash market trades on a gross basis, funding each purchase transaction independently of any sale transactions, even on the same day.

Sebi has proposed permitting “netting of funds”, which would allow FPIs to use proceeds from same-day sales to offset purchase obligations, thereby requiring them to meet only the net payable amount.

The move is aimed at enhancing operational efficiency and reducing the cost of funding for them, especially on index rebalancing days. Also, it is expected to minimise forex-related costs arising from timing mismatches between inflows and outflows.

The proposal follows concerns that the current gross settlement system imposes additional funding requirements on FPIs for at least one extra day, increasing transaction costs.

This will be the fifth board meeting chaired by Sebi Chairman Tuhin Kanta Pandey since he assumed office on March 1, 2025.Apart from FPI-related reforms, the board will review a series of governance and regulatory proposals. These include a comprehensive overhaul of the “fit and proper person” criteria for market intermediaries, to enhance procedural clarity and fairness, the people familiar with the matter said.

Under this, Sebi is considering a proposal to abolish the reference to initiation of winding-up proceedings as a disqualification in a bid to ensure that only a final winding-up order, and not mere initiation of proceedings, is considered while assessing whether a person is fit and proper.

Also, the regulator is looking to explicitly include the right to a hearing in the rules. Although the practice of giving a reasonable opportunity of being heard already exists, it has been proposed to be clearly stated in the rules to remove any procedural ambiguity.

The board will also take up ease-of-doing business proposals related to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

Another significant agenda item is the consideration of a report submitted by a high-level panel on conflict of interest and transparency, they added.

The regulator will discuss the panel’s report, which proposes comprehensive reforms to bring in transparency by way of greater disclosure and a “zero-tolerance” culture to address conflict of interest of top officials of Sebi.

Foreign Portfolio Investors (FPIs) staged a sharp turnaround in early February, pumping Rs 19,675 crore into Indian equities in the first fortnight, supported by the US-India trade deal and easing global macro concerns.

The inflows follow three consecutive months of heavy selling, with FPIs pulling out Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November, according to data from depositories.

Overall, in 2025, FPIs pulled out a net Rs 1.66 lakh crore (USD 18.9 billion) from Indian equities, marking one of the worst periods for foreign flows. The selling was driven by volatile currency movements, global trade tensions, concerns over potential US tariffs and stretched equity valuations.

According to the data, FPIs invested Rs 19,675 crore in this month (till February 13).

Himanshu Srivastava, principal manager – research, at Morningstar Investment Research India, said the recent buying was supported by easing global macro concerns, particularly softer US inflation data, leading to a positive sentiment towards the interest rate cycle, which helped stabilise bond yields and the US dollar.

This improved risk appetite toward emerging markets, including India.

Domestically, steady macro indicators, stable inflation, and broadly in-line corporate earnings reinforced confidence in India’s growth outlook, he added.Echoing similar views, Vaqarjaved Khan, senior fundamental analyst at Angel One, said the inflow was triggered by the US-India trade deal, the supportive Union Budget 2026 with fiscal stimulus, easing global trade uncertainties, and stable domestic rates.

FPIs were net buyers on seven of the eleven trading sessions in February up to the 13th, turning sellers on only four occasions. Despite this, data shows that FPIs have net sold equities worth Rs 1,374 crore so far this month.

The overall figure was skewed by a sharp sell-off of Rs 7,395 crore on February 13, when the Nifty declined by 336 points. The week also saw heavy selling in IT stocks amid the so-called “Anthropic shock”. It is likely that FPIs offloaded IT stocks aggressively in the cash market, as the IT index plunged 8.2 per cent during the week ended February 13, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

After three consecutive months of heavy selling, foreign portfolio investors (FPIs) turned net buyers in the first week of February, infusing more than Rs 8,100 crore in Indian equities, aided by improving risk sentiment, along with a trade deal with the US.

The inflows follow sustained withdrawals in recent months, with FPIs pulling out Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November, data with the depositories showed.

Overall, in 2025, FPIs pulled out a net Rs 1.66 lakh crore (USD 18.9 billion) from Indian equities, marking one of the worst periods for foreign flows. The selling was driven by volatile currency movements, global trade tensions, concerns over potential US tariffs and stretched equity valuations.

According to the data, FPIs invested Rs 8,129 crore in this month (till February 6).

Himanshu Srivastava, principal manager- research at Morningstar Investment Research India, said the recent buying reflects improving risk appetite and renewed confidence in India’s growth outlook.

“The sentiment was supported by easing global uncertainties, stability in domestic interest rate expectations, and optimism around India-US trade and policy developments,” he added.

The turnaround contrasts sharply with January’s outflows, when FPIs exited Indian markets amid a global risk-off environment and elevated US bond yields.Echoing similar views, Vaqarjaved Khan, senior fundamental analyst at Angel One, said the breakthrough in India-US trade talks helped reduce geopolitical uncertainty and fuel a market rally, alongside stabilising US yields and supportive measures announced in the Union Budget for FY26, including fiscal stimulus and sector-specific incentives.

VK Vijayakumar, chief investment strategist at Geojit Investments, said the appreciation of the rupee also played a key role in improving sentiment. The rupee strengthened from a record low of 90.30 against the dollar, although it later weakened to around 90.70 by the close of February 6.

He said the rupee is expected to stabilise and gradually appreciate to below 90 per dollar by the end of March 2026, which could trigger additional FPI inflows, although outcomes will depend on how global trade and artificial intelligence-related developments unfold.

Market participants remain cautiously optimistic. Further inflows could materialise if corporate earnings momentum continues and global trade tensions remain contained, although lingering rupee weakness, elevated valuations and potential shifts in US policy could limit upside, Khan said.

Foreign portfolio investors have started 2026 on a cautious note, extending their selling streak from last year by withdrawing Rs 7,608 crore (USD 846 million) from Indian equities in the first two trading sessions of January.

The withdrawal of funds followed the largest outflow of Rs 1.66 lakh crore (USD 18.9 billion) recorded in 2025, triggered by volatile currency movements, global trade tensions and concerns over potential US tariffs, and stretched market valuations.

This sustained selling pressure by foreign portfolio investors (FPIs) has significantly contributed to the nearly 5 per cent depreciation of the rupee against the dollar during 2025.

However, market experts believe the tide could turn in 2026.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the year is likely to witness a shift in FPI strategy, as improving domestic fundamentals may start attracting net foreign inflows.

A robust GDP growth and the prospects of a recovery in corporate earnings bode well for positive FPI flows in the coming months, he added.

Echoing similar views, Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said normalisation in India-US trade relations, a benign global interest rate environment and stability in the USD-INR pair could create a favourable backdrop for foreign investors.He noted that equity valuations have become relatively comforting compared to last year, which could further support a revival in inflows.

Despite these positive expectations, FPIs have begun 2026 on a cautious note, and according to data from NSDL, they pulled out nearly Rs 7,608 crore from Indian equities between January 1 and 2.

This trend is not unusual, as foreign investors have historically remained guarded in January, having withdrawn funds in eight out of the past ten years, Khan said.

Consequently, FPI flows are likely to remain highly sensitive to global cues and macroeconomic developments. While high valuations were a key concern over the past year, that pressure appears to have eased for now, offering some room for optimism going ahead, he added.

Foreign Institutional Investors (FIIs) are poised to end 2025 with a record-breaking exodus from Indian equities, marking the steepest net outflows ever seen in the country’s capital markets. As of December 27, FIIs have sold equities worth Rs 22,130 crore through the exchanges, taking the cumulative equity selling in calendar year 2025 to Rs 2,31,990 crore.

Meanwhile, investments via the primary market stood at Rs 73,583 crore, bringing the net FII outflow figure to a staggering Rs 1,58,407 crore, the worst annual net selling by FIIs since they began investing in India.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the scale of the outflows, stating, “As the year 2025 draws to a close, FII selling in India is on track to set a new record in FII outflows… This is the worst selling by FIIs since they started investing in India.”

He noted that while FII activity was relatively balanced in the previous year, with primary market investments offsetting exchange-based selling, 2025 has seen a sharp divergence.

“In 2024 also, FIIs have also been selling through the exchanges. They sold equity for Rs 1,21,210 crores. However, for the year as a whole, the net FII inflow was positive since they had invested Rs 1,21,637 crores through the primary market. But for 2025, the net sales figure is a massive Rs 1,58,407 crores,” he explained.

Vijayakumar further attributed the intense selling pressure to the weakening of the Indian rupee. “The sustained selling by FIIs has contributed significantly to the sharp depreciation in INR this year,” he said, adding that prospects for a turnaround are beginning to emerge.

“Improvements in fundamentals are likely to attract net FII inflows in 2026. Robust GDP growth and prospects of improvement in corporate earnings in 2026 augur well for positive FII flows in 2026,” he said.The historic scale of outflows comes despite steady domestic participation and resilient economic indicators, highlighting the complex interplay of global capital flows, currency dynamics, and investor sentiment at the close of 2025.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

FPIs are foreign investors who put money into Indian equities and bonds. Their investment activity is closely tracked by market participants because it often reflects how global capital views India. Over the past few months of 2025, however, the trend in FPI flows has been negative, with sustained net outflows.

This naturally raises an important question: Should we be worried about foreign money leaving, or is India strong enough to withstand such shocks?

In this article, we break down what these FPI outflows reveal about the strength and resilience of the Indian market.

FPI Selling Trend in 2025

In the first seven months of 2025, Foreign Portfolio Investors (FPIs) sold nearly Rs 95,642 crore worth of Indian equities. Four of these months saw negative flows, and the trend has continued in August so far. FPIs sold Rs 22,183 crore of equities (till August 18), higher than the Rs 17,741 crore outflow recorded in July 2025. On a year-to-date basis, FPIs have sold Rs 1,17,825 crore worth of equities. This is in stark contrast to 2024, when FPIs ended the year as net buyers, with an inflow of Rs 427 crore.

In the primary market, FPIs bought Rs 2,579 crore in the first half of August 2025 compared with Rs 4,908 crore during the same period last month. So far this year, they have invested Rs 38,814 crore, lower than the Rs 54,884 crore invested in the first eight months of last year.
These figures raise the question: Can the Indian market stay strong as we enter the festive season, which usually brings positive momentum for investors?

Why FPIs Are Pulling Out

Foreign Portfolio Investors are withdrawing from Indian markets in 2025 due to a mix of global and domestic factors:

US-India Trade Tensions: Escalating disputes over tariffs and trade agreements have created uncertainty. The US proposal to impose a 25% tariff, with an additional 25% penalty, on certain Indian exports triggered risk aversion among foreign investors.

Weak Corporate Earnings: Disappointing Q1 results for several Indian companies raised concerns about profitability and growth.

Rupee Depreciation: A weaker rupee makes returns less attractive and increases currency risk for foreign investors.

High US Interest Rates: Rising US Treasury yields have narrowed the yield gap between Indian and US assets, making US investments relatively more appealing.

Valuation Concerns: Indian equities continue to trade at higher multiples than peers, prompting caution and profit-booking.

Global Risk-Off/China Rotation: FPIs have rotated capital towards China and other markets offering lower valuations, government support, and tech-driven opportunities.

Impact of FPI Flows on Nifty

The link between Nifty’s performance and FPI activity has been evident in 2025.

January: FPIs sold heavily, pushing the Nifty down by nearly 3.5% from the December 2024 close of 23,644.80 to a January low of 22,786.90. While the index recovered part of the fall, it still ended the month with a small loss of 0.58%.

February: The bigger blow came in February, when FPIs sold around Rs 34,574 crore worth of equities. On the last trading day alone, they sold Rs 11,639 crore, their worst single-day sell-off of the year. Out of 20 trading sessions, FPIs were sellers on 18 days. This dragged the Nifty down nearly 5.90% for the month.

March–June: Despite some continued selling in March, the amounts were much smaller and easily absorbed. The Nifty stayed strong, closing positively for four straight months.

July: The negative FPI trend returned, and the Nifty ended the month lower by 2.93%.

Why India’s Market Shows Resilience

Domestic institutional investors (DIIs), including mutual funds, insurance companies, and pension funds, have been crucial in cushioning the impact of foreign selling. Till August 18, they had invested around Rs 4,78,414 crore, more than four times the net FPI outflow. On several occasions, DII inflows even outpaced FPI outflows, helping indices like the Nifty and Sensex remain stable.

For the first time, DII holdings in Nifty 500 companies have overtaken foreign investors’ holdings, marking a shift towards stronger domestic ownership. Other supportive factors include controlled inflation, GDP growth above 6%, government reforms in infrastructure and digitalisation and India’s recent credit rating upgrade by S&P.

Additionally, record SIP inflows and a surge in retail account openings have created a steady stream of domestic capital, particularly in mid-cap and small-cap stocks. This reflects strong faith among Indian investors in the country’s long-term growth story, making them less reactive to short-term global volatility.

Wrapping Up

Despite heavy FPI selling, Indian markets have not suffered major declines; in fact, they have shown resilience and even gained in certain phases. The Independence Day announcement by PM Modi on GST rate cuts further boosted sentiment, with investors focusing more on domestic positives than on foreign outflows.

It’s also important to note that FPIs are not fully exiting India. In August 2025 (till August 18), they invested Rs 6,066 crore in the debt general limit and Rs 138 crore in the debt voluntary retention route. They have also continued putting money into the primary market, while booking profits in the secondary market. In 2024, FPIs had invested over Rs 1,21,637 crore in primary issuances.

Moreover, FPIs currently hold only 18.8% of Indian equities, far below the 30% average in other emerging markets (excluding China). This lower base leaves ample room for foreign investors to increase allocations in the future — which could provide a strong boost to the Indian market when sentiment turns favourable.

(The author is Vice President of Research, TejiMandi)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)

For 2025 so far, inflows show a negative figure of Rs 1,00,443 crore, highlighting sustained selling pressure from foreign investors, especially during January and February.

In the latest sign of weakness, Foreign Portfolio Investors (FPIs) have pulled out Rs 555 crore from Indian equities in July up to the 11th, according to NSDL data. This marks the first monthly outflow after three straight months of positive inflows in April, May, and June.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “There are signs of FPI inflows weakening. After three months of positive inflows, FPI has turned negative, though marginally, so far in July.”

He attributed the latest trend to the earlier heavy selloff in January and February, and said, “The first three months of this year, FPI inflows were negative and this trend was reversed in the next three months.”

Despite selling on the secondary markets, FPIs remained active in the primary market. “An important trend in FPI investment is that FPIs have been consistent buyers/investors in the primary market even when they have been selling through the exchanges,” Vijayakumar added.

Explaining the outflows in July, he said, “FPI selling in July after three months of buying can be attributed to the recovery in the market from the March lows and the consequent elevated valuations. Since other markets are cheaper relative to India, FIIs may again sell and move money to cheaper markets as a short-term strategy.”In the broader global context, India has not been a top performer among emerging markets. “In H1 2025, the Indian market underperformed most markets, including the MSCI EM Index,” he noted.Also read: TCS, Bharti Airtel, among 78 stocks approaching record dates for dividends, bonus issue, stock splits

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Foreign investors have pulled out Rs 31,575 crore from the country’s equity markets so far this month, in the wake of turbulence emanating from sweeping tariffs imposed by the US on most nations, including India. This came following a net investment of Rs 30,927 crore in the six trading sessions from March 21 to March 28. This infusion helped reduce the overall outflow for March to Rs 3,973 crore, according to data from the depositories.

Compared to previous months, this marks a notable improvement. In February, foreign portfolio investors (FPIs) took out Rs 34,574 crore, while in January, the outflow was even higher at Rs 78,027 crore. This shift in investor sentiment highlighted the volatility and evolving dynamics in global financial markets.

According to the data, FPIs pulled out Rs 31,575 crore from Indian equities between April 1 and April 11.

With this, the total outflow by FPIs has reached Rs 1.48 lakh crore so far in 2025.

“The turbulence in global stock markets following President Trump’s reciprocal tariffs has been impacting FPI investments in India too,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said.

He believes that a clear pattern in FPI strategy will emerge only after the ongoing chaos dies down. “In the medium term FPIs are likely to turn buyers in India since both the US and China are heading for an inevitable slowdown as a result of the ongoing trade war. Even in an unfavourable global scenario India can grow by 6 per cent in FY26. This, along with better earnings growth expected in FY26, can attract FPI investments into India once the dust in the market settles down,” he added. Vinit Bolinjkar, Head of Research, Ventura, said the ongoing sell-off in Indian equities is driven by macro and geopolitical risk led by tariffs slapped by the US government.

However, the country’s strong macro fundamentals remain intact. Robust domestic demand and ongoing trade realignment continue to position India favourably for the long term, he added.

Apart from equities, FPIs took out Rs 4,077 crore from debt general limit and withdrew Rs 6,633 crore from debt voluntary retention route.

FPIs remained net sellers of Indian equities in March for the third consecutive month but there was a sharp deceleration in the outflow due to strong buying in the second fortnight of the month. They invested net Rs 26,042 crore ($3,037 million) in the second half of March, a sharp contrast to the outflow of Rs 30,015 crore ($3,438 million) in the first fortnight. As a result, net outflow for the full month reduced to Rs 3,973 crore ($401.2 million). The extent of investment by foreign investors in the coming months will depend upon several factors including the tariff stance by the Trump administration and its impact on global trade, attractiveness of the Indian economy relative to the US, which is facing recessionary pressure and the valuation comfort of the domestic equities.

In March, FPIs sold Rs 6,027.8 crore ($637.3 million) of equities in the secondary market and made purchases worth Rs 2,055.2 crore ($236.1 million) in the primary market. For the fiscal year 2024-25 (April-March), they were net sellers of equities worth Rs 1,27,041 crore ($14,626 million) including primary and secondary markets. This was the second largest outflow following FY22 when they had sold equities worth Rs 1,40,010 crore ($18,468 million).

Compared with the FPIs, domestic funds showed a contrasting trend. Their net equity investment for the full month of March was Rs 9,147.6 crore, lower than Rs 13,516.6 crore that they had invested till March 07. This means the local funds offloaded equities in the remainder of the month even while their foreign counterparts increased buying during the period. Domestic funds invested a record Rs 4.7 lakh crore in equities in FY25.