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. Out of the last 12 months, FPIs were net buyers in only three: April, May, and October.
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 6% 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.
Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said, “The sustained selling by FIIs have contributed significantly to the sharp depreciation in INR this year. Improvement 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.”
In 2024 also FIIs have been selling through the exchanges. They sold equity for ₹121210 crores. However, for the year as a whole, the net FII inflow was positive since they had invested ₹121637 crores through the primary market.
The sharp selling in 2025 can be attributed to a delay in the 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. These factors 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.
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 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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