FPIs pull out Rs 24,753 Cr from equities in the first week of March

Foreign investors continue to pull back money from the Indian equity market, withdrawing Rs 24,753 crore (about $2.8 billion) in the first week of March amid escalating global trade tensions and lacklustre corporate earnings. This came following an outflow of Rs 34,574 crore from equities in February and Rs 78,027 crore in January.

The total outflow by FPIs has reached Rs 1.37 lakh crore in 2025 so far. According to the data with the depositories, Foreign Portfolio Investors (FPIs) offloaded shares worth Rs 24,753 crore from Indian equities this month (till March 7).

This also marks the 13th consecutive week of net outflows. Since December 13, 2024, FPIs have offloaded equity shares to the tune of $17.1 billion. The sustained selling by overseas investors is chiefly due to a combination of global and domestic factors.

A major catalyst continues to be the escalation in global trade tensions, which significantly weigh on investor sentiment. Imposition of higher tariffs by the US on countries like Mexico, Canada and China, along with reciprocal tariffs on several countries, including India, has dented market sentiments, Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment, said.

On the domestic front, lacklustre corporate earnings added to the negative sentiment as it failed to meet investor expectations, thereby reinforcing FPIs to exercise caution toward Indian equities, he added.

This uncertainty has been compounded by a weaker rupee, which has also diminished the appeal of Indian assets.

Vaibhav Porwal, Co-founder of Dezerv, pointed out that the depreciation of the rupee has eroded returns for FPIs, while India's tax structure, with 12.5% tax on long-term capital gains and 20% on short-term gains, contrasts with alternative markets offering lower or zero tax environments.

Moreover, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the growing interest in Chinese stocks, driven by attractive valuations and the Chinese government's recent positive initiatives for large businesses.

This has contributed to a remarkable rally in Chinese stocks, with the Hang Seng Index posting a year-to-date return of 23.48%, compared to a negative 5% return for India's Nifty.

However, he cautioned that this could be a short-term cyclical trade, as Chinese corporate earnings have consistently underperformed since 2008. Adding another layer of complexity, the recent decline in the dollar index is expected to limit fund flows into the US, further shifting investor focus.

Given the growing uncertainty, investors are increasingly gravitating towards domestic consumption-driven sectors such as financials, telecom, hotels, and aviation while moving away from externally linked sectors.

On the other hand, they invested Rs 2,405 crore in the debt general limit and withdrew Rs 377 crore from the debt voluntary retention route.

The overall trend indicates a cautious approach by foreign investors, who scaled back investments in Indian equities significantly in 2024, with net inflows of just Rs 427 crore. This contrasts sharply with the extraordinary Rs 1.71 lakh crore net inflows in 2023, driven by optimism over India's strong economic fundamentals. In comparison, 2022 saw a net outflow of Rs 1.21 lakh crore amid aggressive rate hikes by global central banks.