Share Market Crash / Foreign portfolio investors (FPIs) continue to withdraw from the Indian stock market

Share Market Crash: Heavy withdrawals by foreign portfolio investors (FPIs) continue in the Indian stock markets. In the first fortnight of March 2025 itself, FPIs have withdrawn more than Rs 30,000 crore from the market. Earlier in January and February also, FPIs had withdrawn Rs 78,027 crore and Rs 34,574 crore respectively. According to depository data, a total of Rs 1.42 lakh crore (about US $ 16.5 billion) has been withdrawn so far in 2025.

Withdrawal for the 14th consecutive week

So far in March 2025 (till March 13), FPIs have made a net withdrawal of Rs 30,015 crore from the Indian stock markets. This is their net withdrawal for the 14th consecutive week. FPIs are withdrawing their capital from the market due to many economic and political factors at the global and domestic level. According to Himanshu Srivastava, Associate Director-Manager Research, Morningstar Investment, FPIs are being cautious in emerging markets due to uncertainty in US trade policies and rising global risk sentiment.

Reasons for FPI selling

There are several major reasons behind FPIs withdrawing capital from Indian stock markets:

US bond yield and dollar strength: The increase in US bond yield and strengthening of the dollar has made the US investment market more attractive. Due to this, foreign investors are withdrawing capital from India and investing in the US.

Fall in Indian rupee: The fall in the Indian rupee is reducing returns for foreign investors, due to which they are transferring their capital to safe markets.

Investment in Chinese markets: According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, FPIs are withdrawing from India and investing in Chinese stock markets, as better performance is being seen there.

Global trade tensions: Due to the trade war and uncertainty between the US and other countries, FPIs are preferring safe investment options like gold and the US dollar.

FPI trend in previous years

• In 2023, FPIs invested Rs 1.71 lakh crore in the Indian stock market.
• In 2022, there was a withdrawal of Rs 1.21 lakh crore due to the increase in interest rates by global central banks.
• In 2024, the total investment of FPIs was only Rs 427 crore, which shows that there has been a huge change in investor sentiment.

Conclusion

The continuous withdrawal of FPIs is a matter of concern for the Indian stock markets. However, the participation of domestic investors is increasing during this period, giving some stability to the market. The Government of India and the Reserve Bank will have to focus on policy reforms and a stable economic environment to attract FPIs. If global and domestic conditions are favorable, the FPI trend may turn back towards the Indian markets.