FPIs Sell Record Of Nearly Rs 95,000 Crore In The Year As Tariff, Rupee Worries Heighten

Volatile market conditions and uncertainty in global trade and tariffs have led foreign portfolio investors (FPIs) to shed nearly Rs. 95,000 crore of Indian securities so far in 2025. While the outflows were mainly driven by global investors trimming their Indian equity holdings, the debt segment was not left unscathed.

According to data from National Securities Depository Limited (NSDL), FPIs have net sold Rs. 94,976 crore so far since January, with outflows in the equity segment seen at Rs. 1.58 lakh crore during the year. FPIs also sold debt assets through the voluntary retention route, amounting to Rs. 6,642 crore during the year, and around Rs. 906 crore from debt mutual funds. Compared to this, in 2024, FPIs invested around Rs. 1.66 lakh crore into Indian securities.

A major reason for the heavy outflows from global investors in 2025 was the weakening rupee against its peers and the major global currencies. The rupee has fallen nearly 6 per cent this year as India’s position in the global trade circuit turned uncertain due to heightened tariff imposition on the nation.

US President Donald Trump’s administration has imposed a cumulative 50 per cent tariff on Indian goods, which includes a 25 per cent punitive tariff due to India’s Russian oil purchases. The tariff imposed on India is the highest among its Asian peers. With the US as a major importer of Indian goods, the export ability of Indian took a hit, and some sectors, such as Information Technology (IT) and pharmaceuticals, flagged a slowdown in their growth due to an overall concern over the US economy slowing down in addition to the higher tariffs imposed.

Meanwhile, on the debt side too, FPIs reduced the pace of investment, and in some cases trimmed their exposure, as the interest differential between the US and India reduced. India’s ongoing rate cut cycle has resulted in a cut of 125 basis points in the key policy rate, while in the US, despite a considerable amount of rate cuts by the Federal Reserve, the benchmark US treasury yield remains elevated due to concerns over the ballooning debt of the country.

However, the gloom for FPIs in Indian assets is expected to lift in 2026, as experts say that Indian equities are likely to make a comeback in the upcoming year, especially with a trade deal with the US expected to be reached during the year. This will also reduce the rate of fall for the rupee and, in turn, impart some clarity for global investors on the outlook for Indian assets.

Moreover, some global investors are also recalibrating their investments in emerging markets towards equities after a correction in the market and a lower base is expected to boost equities, with policy changes within the country also expected to aid growth and consumption. The recent rationalisation of goods and service taxes, along with easier accessibility and limits for foreign investments, are a few of such policy changes which are expected to boost foreign investments in the coming year.

“(In) the beginning of the year, a lot of reallocation of funds happens by that time. I think we will be seeing flows back, but I don't really expect a very aggressive window coming in right away,” Upasana Bharadwaj, chief economist at Kotak Mahindra Bank, said. “Unless we don't get absolute clarity on trade deal, etc, there will be some more fear and caution for some more months before we see stability (in rupee).”

On the debt front, too, experts are hoping for an announcement by Bloomberg to include Indian bonds in its Global Aggregate Index. The announcement, which is expected in January, could bring considerable fresh inflows into India’s debt market.

“FPI flow should pick up,” Gaura Sengupra, chief economist at IDFC First Bank, said. “I'm not seeing a massive pickup, but there should be some improvement compared to the outflow that we have seen in FY26.”

The pickup in FPI flows is seen as limited by some, as volatility in US markets is expected to continue in the upcoming year, which will limit investors’ exposure in emerging markets.