Foreign portfolio investors (FPIs) continued to exhibit a lack of confidence in Indian equity markets and withdrew Rs 34,574 crore in February. This pushed the overall outflows to Rs 1.2 lakh crore in just the first two months of 2025, official depository data revealed.
Meanwhile, the investors pulled out Rs 8,932 crore from the debt general limit and Rs 2,666 crore from the debt voluntary retention route (VRR). The outflow from equities came amidst escalating global trade tensions and concerns regarding the growth in corporate earnings, reported PTI.
Vipul Bhowar, Senior Director – Listed Investments, Waterfield Advisors noted, “Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of FPIs.”
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Bhowar stated that the massive dump by FPIs led to the benchmark index BSE Sensex crashing more than 6 per cent year-to-date. “The recent market sell-off has been influenced by rising US bond yields, a strengthening US dollar, and global economic uncertainties, leading to a shift in investor focus towards US assets,” the expert said.
High Valuations And Muted Earnings Drive Away FPIs
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, explained that the investors remain focused on selling in India due to high valuations and shifting funds to Chinese stocks is more lucrative because of lower valuations. “But in the process, they are selling in the best performing sector with attractive valuations,” the analyst stated.
Bhowar pointed out that the earnings report for the October-December quarter has remained modest, indicating uncertainty. This problem is compounded by declining commodity prices and lower consumer spending, which have had an adverse effect on corporate profits and contracted the lure of Indian equities for foreign investors.
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