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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Foreign Institutional Investors’ (FIIs) continued their selling in the first week of December, offloading Rs 11,820 crore worth of Indian equities. They have sold domestic shares worth Rs 1,55,495 crore in 2025 year-to-date.

FII selling on Friday was to the tune of Rs 439 crore while the domestic institutional investors (DIIs) were net buyers at Rs 4,189 crore.

While FIIs have not budged from their selling stance, VK Vijayakumar, Chief Investment Strategist at Geojit Investments said that their sell-off has been completely eclipsed by the sustained strong buying by DIIs who bought equity for Rs 19,783 crores during this period.

“FIIs are selling now primarily because of the sharp depreciation of the rupee this year by around 5%. It is normal for FIIs to sell and take the money out during times of currency depreciation. On the other hand, DIIs have been investing systematically assisted by continuous fund flows, and recently they have been buoyed up by the robust GDP growth numbers and expectations of uptick in corporate earnings, going forward,” he said.

Foreign portfolio flows continued their familiar pattern in December, with overseas investors extending their selling streak — though the pace of outflows has eased from November’s Rs 3,765 crore. This followed a strong inflow of Rs 14,610 crore in October.

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In the third quarter of CY25, FIIs offloaded shares worth Rs 76,619 crore, reversing the buying seen in the April–June period when inflows totalled Rs 38,673 crore. The year had opened on a sharply negative note, with foreign investors pulling out a massive Rs 1,16,574 crore during the January–March quarter.

Vijayakumar sees the selling trends to continue at higher levels as the valuations are still perceived to be on a higher side. “In this tug of war between FIIs and DIIs, there will be days of sharp movements in the markets, in response to news and events. For instance, if there is a fair trade deal between India and the US, that can buoy up the sentiments in both equity and currency markets,” he added.

Vijayakumar said that the 25 bps rate cut by the Reserve Bank of India (RBI) on Friday and the proposed huge liquidity infusion have further improved sentiments in favour of the bulls.

“The decision to give further monetary stimulus to the economy even when the economy is firing on all cylinders reflects a courageous pro-growth central bank. With pro-growth fiscal and monetary policies, growth regaining momentum and indications of accelerating earnings growth, DIIs will continue to buy.

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