Representational.
New Delhi: Foreign investors fled Indian equities in 2025 at a scale never seen before, pulling out a record Rs 1.6 lakh crore (USD 18 billion) as volatile currency movements, global trade tensions, especially potential US tariffs, and stretched valuations eroded risk appetite, reports PTI.
Also, rising US bond yields, a stronger dollar and concerns over geopolitical uncertainties tilted global capital towards developed markets, away from emerging markets such as India.
Foreign portfolio investors (FPIs) have taken out Rs 1.58 lakh crore from the Indian equity markets, while investing over Rs 59,000 crore in the debt market (till December 26) as per data available with the depositories.
This makes 2025 the worst year for equity flows, surpassing the previous record outflow of Rs 1.21 lakh crore in 2022 and coming after a marginal net inflow of just Rs 427 crore in 2024. In contrast, 2023 has seen a robust Rs 1.71 lakh crore equity investment.
Explaining the drivers, analysts point to a mix of global and local pressures.
"Persistently high US interest rates and elevated bond yields improved risk-free returns in developed markets, prompting capital rotation and strengthening the dollar, tightening financial conditions for emerging markets,” Srivastava said.
Phases of rupee depreciation further eroded dollar-based returns and raised hedging costs, dampening India's risk-adjusted appeal. These pressures were compounded by geopolitical uncertainty as concerns over energy prices, supply-chain disruptions and trade-related tensions periodically weighed on sentiment, he added.
Overall, FPIs began 2025 on a weak footing, withdrawing over Rs 78,000 crore in January on the depreciation of the rupee, rise in the US bond yields, and expectation of a tepid earning season. This sell-off continued till March, taking out Rs 1.16 lakh crore in the first three months of the year amid escalation in global trade tensions.
Although they returned with net investments of Rs 38,600 crore between April and June, the recovery was short-lived, with sales resuming from July through September. After a brief return in October with a net investment of Rs 14,610 crore, FPIs again turned net sellers in November and December amid weak global cues.