Foreign Portfolio investors (FPI) continued to withdraw funds from the Indian equity market in the first week of September 2025, with a net outflow of ₹12,257 crore (USD 1.4 billion).
This came following a significant withdrawal in the preceding months, with FPIs pulling out ₹34,990 crore in August and ₹17,700 crore in July, PTI reported.
The recent sell-off has pushed the total FPI outflow from the Indian equities to ₹1.43 lakh crore for the year so far, as data with the depositories showed.
Key drivers of the sell-off
According to the Associate Director & Manager Research of Morningstar Investment, Himanshu Srivastava, quoted by PTI, a combination of global and domestic factors contributed to the FPI outflows:
Global factors:
- Stronger US dollar – A strengthening dollar against rupee often prompts investors to move away from the Indian market.
- US tariff concerns – Renewed threats of US tariffs have increased global uncertainty.
- Persistent geopolitical tensions – Ongoing geopolitical conflicts have fueled a “risk-off” sentiment among investors.
Domestic factors:
- High valuations – Indian equities are trading at a premium compared to other emerging markets, leading FPIs to book profits and reduce exposure to the Indian market.
- Slowing corporate earnings: Concerns over a slowdown in corporate earnings momentum have also contributed to the negative sentiment.
US tariff tensions, a weak rupee, and a broader global risk-off sentiment triggered the FPI selloff. However, the impact was cushioned by the government’s GST rate rationalisation and a robust first-quarter GDP growth of 7.8%, noted Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, echoing similar views expressed by Srivastava.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, added that sustained heavy Domestic Institutional Investors (DII) buying has allowed FPIs to book profits at high valuations and redeploy capital into cheaper markets such as China, Hong Kong, and South Korea.
Outlook for the coming week
In the coming week, FPI flows are expected to be driven by US Fed commentary, US labour market data, RBI rate cut expectations and its stance on rupee stability, Khan added.
“While near-term volatility may persist, India’s structural growth story, policy reforms, such as GST rationalisation, and expectations of an earnings revival could bring FPIs back once global uncertainties ease,” Srivastava noted, speaking of the outlook.
While FPIs were not net sellers in equities, their activity in the debt market was mixed during the same period. They invested ₹1,978 crore in the debt general limit but withdrew ₹993 crore from the debt voluntary retention route during the period under review, the news agency PTI reported.
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