Foreign Investors Continue Selling Spree in Indian Markets

Foreign Portfolio Investors (FPIs) have intensified their selling streak in February, withdrawing a massive Rs 34,574 crore from Indian equities, according to data from the National Securities Depository Limited (NSDL). The sell-off was particularly pronounced in the final week of February, with FPIs offloading Rs 10,905 crore worth of shares between February 24 and February 28. Despite a brief respite on the last trading day of the month, where foreign investors turned net buyers by injecting Rs 1,119 crore into the market, Indian stock indices suffered a sharp decline, with both the Nifty and Sensex dropping over 1.8 per cent on Friday.

2025 Sees Continuous Outflow of Foreign Capital

So far in 2025, FPIs have sold equities worth Rs 1,12,601 crore, highlighting a persistent outflow of foreign capital. This trend has been attributed to the strengthening of the US dollar and growing concerns over India's economic outlook, which have significantly dampened investor sentiment.

Market Volatility and Investor Confidence Shaken

The ongoing FPI exodus has not only fueled market volatility but also shaken investor confidence. The situation was exacerbated in January, when FPIs pulled out Rs 78,027 crore, marking a stark contrast to December 2024, when foreign investors were net buyers with an inflow of Rs 15,446 crore. However, the year concluded on a weak note, with overall net FPI investments in equities for 2024 plummeting to just Rs 427 crore.

Global Factors Driving the Sell-off

Analysts point to several global factors behind the relentless selling, including rising US bond yields, economic uncertainties, and geopolitical risks. A significant factor has been the resurgence of Donald Trump in US politics, which has boosted confidence in the American economy, leading investors to divert funds from emerging markets like India to safer assets in the US.

Challenges Facing Indian Markets

The sharp decline in FPI inflows is indicative of a broader trend where investors are increasingly favoring safer assets amidst growing uncertainties. In 2024, net FPI investments in India saw a drastic 99 per cent drop compared to the previous year, underscoring the challenges confronting Indian markets.