Mumbai: Foreign portfolio investors (FPIs) pulled out Rs 11,820 crore from Indian equity markets in the first week of December. The main reason behind this selling was the sharp fall in the Indian rupee, which has weakened by nearly 5 percent this year. A weak rupee reduces foreign investors’ returns, forcing many to cut their exposure to Indian stocks.
Outflows Add to a Tough 2025 So Far
The selling trend has been strong for most of 2025. After a small pause in October, when FPIs invested Rs 14,610 crore, the selling resumed. Earlier months saw heavy withdrawals of Rs 23,885 crore in September, Rs 34,990 crore in August and Rs 17,700 crore in July. With the latest outflow, the total FPI selling in equities for 2025 has now touched Rs 1.55 lakh crore.
Why Foreign Investors Are Selling
Experts say the key trigger is currency risk. When the rupee falls, foreign investors tend to sell because their dollar returns shrink. Another reason is year-end portfolio reshuffling, as global investors adjust their investments before the holiday season. Delays in the India-US trade deal have also made global investors more cautious.
Domestic Investors Step In to Support Markets
Even with heavy FPI selling, Indian markets have not fallen sharply. This is because Domestic Institutional Investors (DIIs) bought shares worth Rs 19,783 crore during the same period, fully offsetting foreign selling. Domestic investors have remained confident due to strong GDP growth and expectations of better corporate earnings in the coming quarters.
RBI and Global Cues Offer Some Relief
Market sentiment improved after the RBI cut interest rates by 25 basis points on December 5. On that day, FPI flows turned positive with net buying of Rs 642 crore, after days of continuous selling. The RBI also raised its FY26 GDP growth forecast to 7.3 percent and lowered its inflation outlook to 2 percent, which boosted market confidence.
Global liquidity could improve further, as the US Federal Reserve is expected to announce a 25 bps rate cut next week. This could support risk assets, including Indian equities, although the pending India-US trade deal remains a key risk.
Activity in the Debt Market
In the bond market, FPIs invested Rs 250 crore under the general limit but withdrew Rs 69 crore through the voluntary retention route during the same period.
