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.

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.

The drop in Indian equities since October 1, 2024, has eroded the equity assets under custody (AUC) of most global funds in India, with an average decline of 20%, according to NSDL data.

Funds based in Mauritius and Canada have been the hardest hit, witnessing a sharp 25% drop in AUC. In contrast, Norway-based funds reported the smallest decline, with their AUC falling by 14%.

Meanwhile, funds from other key investment hubs—including the United States, Singapore, Luxembourg, Ireland, the United Kingdom, and Mauritius—each saw their AUC shrink by around 20%.

Foreign portfolio investors (FPIs) have dumped over Rs 3 lakh crore ($36 billion) of Indian shares since October 1, dragging the benchmark Nifty 50 down 11%.

The selloff has hit smaller stocks harder, with the Nifty Midcap 150 sliding 18% and the Nifty Smallcap 150 shedding 22%.

As of February, foreign portfolio investors’ AUC in India had dropped to Rs 62.3 lakh crore ($750 billion), down 20% from Rs 77.9 lakh crore in September 2024. The ratio of India’s market capitalisation to FPIs’ AUC fell to 15.74%, continuing a steady decline since December 2020 amid rising inflows from domestic investors.

The selling spree by FPIs in Indian equities continued to decelerate in the second week of November. They sold equities worth $287.6 million (Rs2,426 .6 crore) in the week ended November 15 compared with the selling of $2,374.6 million (Rs19,993.7 crore) in the prior week. Thus, in the first fortnight of November, FPIs sold equities worth $2662.2 million (Rs22,420.3 crore). This was one-third compared with the $7,898.3 million worth of selling seen in the first fortnight of the previous month. FPIs had sold a record $11,195.4 million worth of equities in the whole of October.

The FPI flow even turned positive briefly on November 13 when they invested net $336.9 after a gap since October 22 when they had pumped $1,273.8 million in Indian equities.

In addition, the foreign investors increased net inflow in the Indian primary market to $1,177.5 million at the end of the first two weeks of November compared with $477.6 million of investment in the comparable period of the previous month. The primary market includes investments through initial public offerings (IPO) and qualified institutional buying (QIB).

Even after excluding the primary market inflows, the FPI selling in the secondary equity market seems to have moderated. In the first fortnight of November, they sold equities worth $3,839.7 million, which was more than half of $8,375.9 million sold in the corresponding period of October.

In 2024 so far, FPIs have been net sellers of equity worth $1,803.4 million (Rs15,828 crore), which includes an inflow of $11,453 million in the primary market and an outflow of $13,256.3 million in the secondary market.

Amid FPI selling, domestic funds continued to park money in the equity market. In the seven trading sessions to November 11, they invested net Rs10,210.5 crore compared with R 48,531 crore in the first seven sessions of October. For the whole of October, they had invested a record net Rs90,771 crore.

Amid sustained selling by foreign portfolio investors (FPIs) in the Indian stock markets, Sriram Krishnan, Chief Business Officer of the National Stock Exchange (NSE), expressed confidence in the resilience of India’s growth story.

He emphasized that the current FPI sell-off does not indicate any fundamental issue with India’s economic prospects and that India remains an attractive destination for investments.

He noted that despite recent market volatility, the long-term outlook for India is robust, positioning the country as a solid choice for investors worldwide.

” According to analaysts, in the last one month, because of the US elections, there was a bit of uncertainty and a lot of people feel that the selling FPI selling we have witnessed is because of the elections, the run up to the elections where there was a neck to neck situation being seen by many. But if you look at the India story, India seems to be a very strong, attractive investment destination, it continues to be, so we don’t see any fundamental challenges. We are as an exchange quite confident that you know, investors will continue to trade on NSE in India” said Krishnan in an exclusive conversation with ANI.

Krishnan also addressed the anticipated IPO of the NSE, clarifying that the exchange is awaiting regulatory approval. He assured that once all regulatory requirements are met, the NSE will proceed with the IPO, although he did not provide a specific timeline.

He said “As and when we get the regulatory approval, we will do the IPO, we don’t have any idea right now. Whenever we get the approval, we will do the IPO”.As the young investors are attracting towards the markets, Krishnan shared the exchange’s initiatives to educate and engage young investors. He stated that with growing interest from younger demographics, the NSE has launched various resources, including a new app and an extensive range of educational programs. “We conduct about 20,000 investor awareness programs annually,” Krishnan said, adding that the NSE is eager to collaborate with certified trainers to expand these educational efforts further.

The exchange’s website also offers a wealth of learning resources, aimed at equipping investors of all ages with the knowledge to navigate the markets confidently.

He added “So anybody who is desirous of learning more can, you know, participate in these events programs which are being held from time to time or, you know, depend on the resources that we have on our website”.

Indian primary equity market continued to attract funds from foreign portfolio investors (FPIs) in October notwithstanding their exodus from the secondary market according to the data from NSDL. FPIs parked net $ 2,361 million (Rs 19841.9 crore) in the primary market, the highest monthly investment since November 2021 when they had invested $ 3,745 million through this route, which consists of participation in initial public offerings (IPOs) and qualified institutional buying (QIB). FPIs invested net $ 10,275.5 million in the first 10 months of 2024 in the primary market.

In the secondary market, they sold equities worth $ 13,556.9 million (Rs 1.1 lakh crore) in October, the highest ever monthly outflow, surpassing the $ 8,126.8 million worth of selling in March 2020. Rising attractiveness of Chinese equities amid economic impetus by the local government has lured FPIs away from Indian equities.

With the mega selloff in October, FPis have sold equities worth $ 9,416.7 million net in the secondary market in 2024 so far. As a result, the net inflow of FPIs in primary and secondary market together for 2024 so far has reduced to $ 858.9 million compared with $ 12,054 million at the end of the previous month.

Despite such a concentrated selling by FPIs in the secondary market, the fall in the benchmark indices was limited to around 6% in October, helped by a sharp improvement in investment by domestic institutions. According to the data from SEBI, domestic mutual funds invested a record net Rs 87,228 crore (over $ 10.3 billion) in October till 29th. Local funds have invested Rs 3.7 lakh crore so far in 2024 on net basis, far outpacing the investment of Rs 1.7 lakh crore in the whole of the previous year. This was also higher than the previous record of nearly Rs 2 lakh crore investment in 2022.

The collective weight of the consumption-related sectors including automobiles, consumer durables, consumer services, FMCG, and telecommunications in the portfolios of foreign portfolio investors (FPIs) reached a record high 25.5% at the end of August 2024, according to data from NSDL. It increased by 308 basis points over the past 12 months. FPIs have invested $8.5 billion in consumption stocks during the period, forming 90% of their total investments. Year-to-date, FPIs have allocated $6.9 billion to consumption stocks, while their total inflow has been limited to $5.1 billion.

The assets under management (AUM) for consumption stocks in the FPI portfolio increased by 55% to $229 billion over the past year. Their total AUM increased by 39% to $900 billion during the period, accounting for nearly 18% of India’s total market capitalization.

Among consumption stocks, the automobiles sector has the highest weight at 7.8% in the FPI portfolio followed by FMCG at 6.2%, consumer services at 4.5%, telecommunications at 3.90%, and consumer durables at 3%. The weights of auto, consumer services, and telecommunications have reached record highs in the FPI portfolio. The weight of consumer services in FPI portfolios increased by 174 basis points over the past 12 months, the largest increase among all sectors followed by 136 basis points rise in telecommunications and 134 basis points increase in the auto weight. Historically, FMCG has been the largest sector in the FPI portfolio; however, since the beginning of 2024, the auto sector has overtaken FMCG amid margin-led earnings growth.