FPIs pull out Rs 77,901 cr of equities in first half of 2025

By | July 18, 2025
Graph showing FPIs pull out Rs 77,901 crore from Indian equities in H1 2025

Foreign Portfolio Investors (FPIs) have withdrawn a massive ₹77,901 crore from Indian equities during the first half of 2025. This development has sparked concerns among investors, policymakers, and analysts alike. The scale of the outflow—driven largely by global uncertainty, elevated valuations, and sectoral rebalancing—marks one of the most volatile six-month periods in recent FPI activity.

In this article, we explore the key reasons behind this withdrawal, the sectors most affected, the partial recovery in Q2, and the broader implications for the Indian economy and stock market in the months to come.

H1 2025: A Tale of Two Quarters

The FPI activity in the first half of 2025 can be split into two contrasting narratives:

  • Q1 2025 (January–March): Marked by significant selling pressure.
  • Q2 2025 (April–June): Witnessed a moderate rebound with positive net inflows.

According to data released by NSDL, FPIs sold equities worth ₹1.16 lakh crore in Q1 2025 alone. January witnessed the highest outflow at ₹78,027 crore, followed by ₹34,574 crore in February and ₹3,973 crore in March.

However, sentiment turned slightly positive in Q2. April saw modest inflows of ₹4,223 crore, May recorded ₹19,860 crore, and June continued the trend with ₹14,590 crore being pumped into equities. The total net outflow for H1 still stood at a steep ₹77,901 crore.

What Triggered the Massive Outflows?

Several domestic and global factors contributed to the sharp exodus:

  1. High Valuations in Indian Equities:
    Indian markets entered 2025 at elevated price-to-earnings ratios. Many foreign investors considered the valuations overstretched, prompting them to book profits and rebalance portfolios toward cheaper markets.
  2. Rising Global Bond Yields:
    As the U.S. Federal Reserve kept interest rates higher for longer and bond yields became attractive, global funds began reallocating capital to debt markets in developed economies.
  3. Geopolitical Uncertainty:
    Heightened tensions in Eastern Europe and the Middle East, coupled with uncertainty around U.S. presidential elections, made emerging markets less attractive during the first quarter.
  4. Weak Earnings in Key Sectors:
    Disappointing results from sectors like IT and FMCG—long-time FPI favorites—further drove foreign investors away from Indian stocks.

Sectors Most Affected by the FPI Exodus

A closer analysis of sector-wise data reveals where the FPI money exited and where it re-entered:

  • Outflows:
    • Information Technology (₹30,600 crore):
      Rising wage costs, lower global tech demand, and margin pressures led to significant withdrawals.
    • FMCG & Auto Components:
      Concerns over rural demand and inflation weighed on these sectors.
    • Consumer Durables and Power:
      Slower infrastructure spending and stretched valuations led to corrections.
  • Inflows:
    • Telecom (₹26,685 crore):
      Strong ARPU growth and 5G monetization made telecom a favored pick.
    • Financial Services (₹13,717 crore):
      Stable earnings and improved asset quality encouraged re-entry in banks and NBFCs.
    • Services and Capital Goods:
      Infrastructure-linked plays saw renewed interest amidst government capital expenditure plans.

Why Q2 Saw a Turnaround

Despite the gloom of Q1, FPIs turned net buyers in Q2. Several reasons contributed to the partial reversal:

  • Correction in Valuations:
    The sharp sell-off in Q1 brought many quality stocks to more attractive price points.
  • Improved Macro Indicators:
    India’s inflation moderated, GDP forecasts held steady, and the rupee stabilized—adding to investor comfort.
  • Political Stability Signals:
    Clarity around upcoming state elections and consistent government policies reassured long-term investors.
  • Resilience in Domestic Flows:
    Mutual fund SIPs and domestic institutional investors continued to buy, providing a floor to falling prices.

What About July and H2 2025?

So far in July, FPIs have again turned cautious, pulling out approximately ₹555 crore. This signals that volatility is likely to persist, especially as markets remain sensitive to global cues, crude oil prices, and U.S. Fed policy actions.

Key factors to watch in H2 2025:

  • The direction of U.S. interest rates.
  • Monsoon performance and rural demand recovery.
  • Corporate earnings trajectory in Q2 and Q3.
  • Political developments leading up to 2026 general elections.

Is This a Cause for Panic?

Not necessarily. While ₹77,901 crore is a significant outflow, it must be seen in context:

  • FPI shareholding in Indian equities has only slightly dipped—from 16.11% in December 2024 to 16.09% in June 2025.
  • India remains a long-term growth story, and FPIs have historically returned after short-term corrections.
  • Strong domestic participation continues to offset some of the selling pressure.

Conclusion

The ₹77,901 crore outflow from Indian equities in the first half of 2025 is a reminder of how sensitive FPIs are to global dynamics and market valuations. However, the resilience of the Indian market—evident in the Q2 recovery—shows the strength of its fundamentals.

While near-term volatility may persist, long-term investors should focus on quality stocks and sectoral trends. For FPIs, India is likely to remain an attractive destination once global uncertainties subside and valuations become more favorable.