FPI Outflows: Investors Withdraw Rs 12,257 Crore from Equities in Early September
Foreign Portfolio Investors (FPIs) have withdrawn a staggering ₹12,257 crore (approximately $1.4 billion) from Indian equities during the first week of September. This trend follows significant outflows in previous months, driven by a stronger dollar, renewed concerns over U.S. tariffs, and ongoing geopolitical tensions. As a result, total equity withdrawals by FPIs have reached ₹1.43 lakh crore in 2025, raising alarms among market analysts about the factors influencing this risk-off sentiment.
Factors Behind the Withdrawals
Market experts attribute the recent wave of withdrawals to a combination of global and domestic factors. Himanshu Srivastava, an associate director at Morningstar Investment, noted that the stronger dollar and renewed tariff threats from the U.S. have contributed to a climate of uncertainty. Additionally, persistent geopolitical tensions have further exacerbated the situation. On the domestic front, analysts point to high valuations and a slowdown in corporate earnings as significant concerns. Srivastava emphasized that Indian equities are trading at a premium compared to other emerging markets, prompting FPIs to book profits and reduce their exposure.
Vaqarjaved Khan, a senior analyst at Angel One, acknowledged that while near-term volatility may continue, India’s long-term growth prospects, supported by policy reforms and expectations of an earnings revival, could entice FPIs back into the market once global uncertainties subside. This sentiment reflects a cautious optimism among some analysts regarding the resilience of the Indian market.
Domestic Institutional Investors Step In
Despite the outflows from FPIs, domestic institutional investors (DIIs) have been actively buying, which has allowed FPIs to exit at favorable valuations. VK Vijayakumar, chief investment strategist at Geojit Investments, highlighted that this dynamic has enabled FPIs to redirect their funds toward cheaper markets, such as China, Hong Kong, and South Korea. The shift in investment strategy underscores the competitive nature of global markets and the need for investors to adapt to changing conditions.
In contrast to the equity withdrawals, FPIs have shown interest in the debt market, investing ₹1,978 crore while pulling out ₹993 crore from the voluntary retention route. This indicates a strategic shift in investment preferences, as FPIs seek safer avenues amid heightened market volatility.
Looking Ahead: Market Sentiment and Indicators
As the market navigates these turbulent waters, future sentiment will be influenced by both global economic data and domestic macroeconomic indicators. Analysts have pointed to the upcoming inflation data for August, scheduled for release on September 12, as a critical factor in shaping market flows. Additionally, key U.S. economic releases, including consumer inflation and jobless claims, will play a significant role in determining investor sentiment.
The U.S. Federal Reserve’s policy meeting on September 16-17, along with fluctuations in crude oil prices and the rupee-dollar exchange rate, are also expected to be major drivers of market dynamics. Pravesh Gour, a senior technical analyst at Swastika Investmart Ltd., noted that Indian equities may enter the week with a cautiously optimistic outlook, particularly focusing on sectors linked to consumption and capital expenditure.
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