Business News: After three consecutive months of robust investments in Indian equity markets, foreign portfolio investors (FPIs) have shifted gears, emerging as net sellers in July 2025. According to data from the National Securities Depository Limited (NSDL), FPIs have withdrawn a net amount of 5,524 crore from the Indian stock market so far this month. This reversal in sentiment is being attributed to rising trade tensions between India and the United States, as well as mixed corporate earnings results. Experts suggest that the latest sell-off reflects a more cautious stance by foreign investors amid global uncertainties and subdued expectations for domestic earnings growth. With this, total FPI outflows from Indian equities in the calendar year 2025 have now reached 83,245 crore.
FPI Investment Trend Over the Past Three Months
Before July, FPIs had consistently pumped money into Indian equities over the previous three months:
- June 2025: Net inflow of 14,590 crore
- May 2025: Net inflow of 19,860 crore
- April 2025: Net inflow of 4,223 crore
These investments have provided a significant boost to domestic markets. However, this positive streak appears to have paused in July, as global developments and local factors reshaped investor sentiment.
Steady Interest in the Debt Market
Despite pulling back from equities, FPIs remain active in the debt segment. In July, they have made:
- 1,850 crore investment in the normal limit debt category
- 1,050 crore investment via the voluntary route
This suggests that while they may be adopting a wait-and-watch approach in equities, foreign investors are not entirely bearish on India’s long-term economic outlook.
What Lies Ahead for FPI Flows?
According to Hemanshu Srivastava, Associate Director at Morningstar Investment Research India, the future trajectory of FPI investments will likely hinge on two key factors:
- The progress in India–US trade negotiations
- The earnings performance of Indian corporates
Srivastava notes, “If the ongoing trade frictions are resolved and corporate earnings see improvement, investor confidence could rebound, potentially attracting FPIs back to Indian equities.” He also added that elevated market valuations are another factor prompting profit-booking and portfolio reassessment by FPIs.
India Remains on Global Investment Radar Amid Hopes of Recovery
The shift to net selling by FPIs in July has introduced some volatility into domestic markets. However, their continued engagement with the debt market, along with prospects for trade stabilization and earnings recovery, indicate that India remains firmly on the global investment radar. Should macroeconomic conditions improve and corporate performance strengthen, a resurgence in FPI inflows could well be on the horizon.
