The Indian stock market witnessed the worst-ever outflows from foreign portfolio investors (FPIs) in 2025, as their sentiment towards Asia’s third-largest economy remained fragile, even though corporate earnings and domestic consumption showed signs of recovery.

As of December 27, FPIs have sold ₹22,130 crore worth of Indian equities through exchanges, extending their selling streak to a sixth consecutive month. This has taken cumulative secondary market outflows to ₹2,31,990 crore.

In contrast, FPIs remained net buyers in the primary market, pumping in ₹73,583 crore during the year. Including these inflows, total net outflows stood at ₹1,58,407 crore, marking the worst annual outflow on record”> ₹1,58,407 crore, marking the worst annual outflow on record. Out of the last 12 months, FPIs were net buyers in only four: March, April, May, and June.

Trade deal delays, valuations and AI gap drive 2025 exodus

December saw a sharp acceleration in FPIs selling after a brief slowdown in November as market sentiment weakened, following a sustained crash in the Indian rupee, which lost over 5% of its value this year, making it the worst performer among Asian currencies.

A weak rupee directly reduces the dollar value of FPI investments and raises perceived risks, prompting foreign investors to withdraw capital in search of safer and more stable returns.

In addition, delays in a trade deal with the US, stretched valuations, India’s relatively lower exposure to the AI boom, and a recovery in other Asian markets offering more attractive valuations combined to accelerate FPIs’ selling spree.

Earlier in the year, India was among the first major markets to rebound after US President Donald Trump announced global tariffs in April, attracting investors who saw the country as a safe haven amid trade tensions. However, both countries did not finalize a trade deal despite multiple rounds of negotiations.

During 2024, FIIs offloaded equities worth ₹1,21,210 crore in the secondary market. However, the year still ended with net positive flows, supported by investments of ₹1,21,637 crore through primary issuances.

DII buying cushions FPI outflows, keeps Nifty on long-term growth path

Although the Indian stock market witnessed sharp outflows from overseas investors, the impact on domestic equities remained limited, with the Nifty 50 surging 10% in 2025, putting it on track for its tenth straight year of gains, supported by strong buying from domestic institutional investors (DIIs).

DIIs, largely comprising mutual funds, bought equities worth ₹64,056 crore in December, taking their ₹7.72 lakh crore”>total inflows for 2025 to a record ₹7.72 lakh crore, underscoring robust retail investor confidence in the domestic economy.

DIIs began the year with aggressive buying of ₹86,591 crore in January, followed by ₹64,853 crore in February. While inflows softened in March and April, they picked up pace again in May and June, with purchases of ₹67,642 crore and ₹72,673 crore, respectively, largely driven by a surge in block deals.

These sustained inflows have not only cushioned the impact of FPI selling but have also led to a notable shift in institutional ownership across India Inc.

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