Foreign portfolio investors (FPIs) withdrew $2.7 billion from Indian equities in September, extending their selling streak for a third straight month and putting 2025 on course for record foreign withdrawals, data from the National Securities Depository showed.
So far this year, foreign investors have offloaded $17.6 billion, the second-highest on record for the January–September period, according to the data released late on Tuesday.
The only larger nine-month exodus was in 2022 when FPIs sold $22.3 billion due to the Russia-Ukraine war, aggressive global rate hikes, and a surging U.S. dollar. However, inflows resumed in late 2022 after markets started pricing in U.S. rate cuts, which brought down full-year outflows to $16.5 billion.
That is still lower than the tally so far this year, putting 2025 on track to be the worst ever for foreign withdrawals.
“The Nifty’s one-year return is already at –4%. Add in geopolitical tensions, the tariff shock from the U.S., H-1B visa fee hike, and lackluster earnings, and it’s only logical for FPIs to shift capital elsewhere,” said Ajit Banerjee, president and chief investment officer at Shriram Life Insurance.
Steep 50% tariffs on domestic goods are expected to dent over half of India’s $87 billion exports to the U.S., potentially shaving 60–80 basis points off GDP growth if they last a year, according to multiple brokerages.
Simultaneously, sharply higher H-1B visa fees have worsened trade ties between the two countries and pressured India’s IT sector, a traditional FPI favorite. Indeed, IT has seen the heaviest FPI selling this year, $7.2 billion, followed by power, consumer and financials.
Banerjee pointed to a “tactical rotation” of FPI flows into China and other Asian peers, aided by stronger earnings, cheaper valuations and relatively lower tariffs.
Relentless selling, meanwhile, has left India’s benchmark Nifty 50 and BSE Sensex trailing their regional counterparts this year, rising only 4.1% and 2.7% versus a 22% uptick in Asian and 24.6% jump in emerging market peers.
Still, analysts see room for optimism. Indian equities now trade at more reasonable valuations and consumption tax cuts alongside pro-growth monetary policy could lift earnings in the second half of fiscal 2026, which may help lure FPIs back to domestic markets.
($1 = 88.7700 Indian rupees)
(Reporting by Bharath Rajeswaran in Bengaluru; Editing by Sonia Cheema)
