FPI exodus persists in March despite ₹31,000 crore inflows in final week; ₹1.16 lakh crore sold in 2025 YTD | Stock Market News

Foreign portfolio investors (FPIs) have continued their unpredictable stance on Indian equities in 2025, marked by sharp outflows early in the year followed by renewed buying interest in March. Despite heavy selling in January and February, FPIs turned buyers towards the end of March, helping the benchmark Nifty recover by nearly 6 percent. However, concerns over US President Donald Trump’s tariff policies and global economic uncertainty continue to influence FPI sentiment, keeping the Indian markets on edge.

FPI Outflows Reverse in March After Heavy Selling

Foreign portfolio investors (FPIs) have pulled out a massive ₹1.16 lakh crore from Indian equities so far in 2025, starting the year on a negative note. After recording net inflows in December 2024, FPIs reversed course, triggering heavy outflows in the new year. The exodus coincided with a sharp correction in Indian markets, particularly in broader indices, amid global economic uncertainties and elevated domestic valuations.

While Indian markets witnessed a recovery in March, FPIs remained net sellers, offloading equities worth ₹3,973 crore during the month. However, this was a significant drop from the heavy outflows seen in the previous months. Notably, foreign investors pumped nearly ₹31,000 crore into Indian equities during the last six trading sessions of March. This infusion was driven by attractive valuations, a stronger rupee, and improved macroeconomic indicators.

The return of FPIs as buyers fueled a smart recovery in the Nifty, which surged around 6 percent, signaling renewed confidence in the market.

“The change in FII strategy from sustained selling to modest buying which was visible in the week ending March 21st continued with increased intensity for the week ending March 28th. Big buying by FIIs during the last several days of March substantially reduced the total FII selling in March to ₹6027 crores. Since FIIs invested ₹2055 crores through the primary market, the net FII sell figure for March is down to only ₹3972 crores. (Source: NSDL)

The reemergence of FIIs as buyers contributed to smart about 6 % recovery in Nifty. What prompted FIIs to turn buyers?

1. The valuations turned attractive after around 16% correction from the September 2024 peak.

2. ⁠Recent appreciation in rupee led to reversal of the momentum trade towards US investment.

3. ⁠India’s macros – GDP, IIP and CPI inflation- improved paving the way for a rally in the market.

Going forward, the trend in FII flows will depend mainly on Trump’s reciprocal tariffs expected on April 2nd. If the tariffs are not severe, the rally may continue,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

Despite the recent inflows, FPI activity for FY25 highlights significant volatility, with contrasting flows across months.

Massive Outflows in January and February

In January 2025 alone, FPIs dumped ₹78,027 crore worth of equities, followed by another ₹34,574 crore outflows in February. In contrast, December 2024 saw net inflows of ₹15,446 crore after two consecutive months of withdrawals. FPIs had offloaded ₹21,612 crore in November and a record ₹94,017 crore in October.

The heavy selling weighed on Indian equities, dragging the broader markets lower. While the Nifty fell nearly 1 percent year-to-date (YTD), the Nifty Midcap index slipped over 10 percent, reflecting the greater impact on smaller stocks.

Debt Inflows Offset Equity Outflows

Despite the substantial equity outflows, FPI activity in the debt market remained positive. So far in 2025, FPIs have pumped ₹779 crore into Indian debt, providing some relief to the overall market sentiment. However, total FPI outflows across equities, debt, hybrid, and debt-VRR segments stood at ₹68,531 crore YTD.

US Tariffs and Global Uncertainty Weigh on Sentiment

Experts believe the FPI exodus could persist as market sentiment remains fragile, largely due to US President Donald Trump’s tariff policies. Trump announced plans to initiate a reciprocal tariff strategy with “all countries” starting April 2, quashing earlier speculation that the initial tariffs would only target 10–15 nations.

The new tariffs, a key part of Trump’s trade policy, aim to protect US manufacturing and rebalance global trade. The move is also expected to fund his domestic priorities, including extending tax cuts from his first term and fulfilling additional campaign promises from 2024.

Outlook: Volatility to Persist Amid Global Risks

While the recent FPI inflows in March offered temporary relief, analysts caution that the broader trend remains uncertain. With global trade tensions, inflationary pressures, and US monetary policies influencing investor sentiment, market volatility is expected to persist.

Analysts believe the new tariffs could trigger volatility in Indian equities, prompting FPIs to adopt a more cautious approach. The overall FPI outflows from Indian markets—including equities, debt, hybrid, and debt-VRR segments—stand at ₹68,531 crore YTD in 2025. However, the debt market saw inflows worth ₹779 crore, indicating some stability in fixed-income investments.

Himanshu Kohli, Co-founder of Client Associates, believes FPIs are now more constructive on India but expects short-term volatility. He noted that if India maintains its growth and stability while global risks remain contained, FPIs are likely to increase their India allocations. Kohli added that with the USD index seemingly having peaked and the sharp rupee depreciation behind, the backdrop is turning favorable for FPI inflows.

Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, highlighted that FPI flows are driven by returns rather than sentiment. Sheth explained that FPIs stayed in India as long as the returns were attractive but fled once they found better opportunities elsewhere, such as rising yields in the US bond markets. He believes FPIs will return to India once valuations become attractive again, offering a favorable risk-reward opportunity.

While FPI flows into Indian equities remain volatile, the late-March inflows have provided some relief to the markets. However, the broader picture for 2025 still reflects significant fluctuations, driven by global trade uncertainties and macroeconomic factors. With Trump’s tariffs looming and domestic valuations still elevated, FPI sentiment is likely to remain fragile in the near term. Market participants will be closely watching global trade developments and monetary policies to gauge the direction of FPI flows in the coming months.

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