FII outflows from Indian markets touch Rs 1.98 lakh cr in 2025; total selling hits Rs 3.19 lakh crore over 21 months

Synopsis

Foreign Institutional Investors have pulled out Rs 1,98,103 crore from Indian equities in 2025. September alone saw Rs 27,163 crore exit. This selling trend has continued for nearly two years, totaling Rs 3,19,313 crore over 21 months. Analysts point to valuation concerns and global allocation shifts. Outflows may slow as valuations stabilize and corporate earnings improve.

Foreign Institutional Investors (FIIs) have pulled out a staggering Rs 1,98,103 crore from Indian equities in 2025 so far, with September alone witnessing outflows worth Rs 27,163 crore through exchanges.

This selling streak continues a broader trend that has persisted for nearly two years, raising concerns about the sustainability of foreign capital in Indian equity markets.

Despite ongoing selling through secondary markets, FIIs maintained their long-term trend of participating in primary equity offerings, investing Rs 3,278 crore via the primary route in September.

However, the equity sell-off has far outweighed the inflows, pushing cumulative FII selling to Rs 3,19,313 crore over the last 21 months, including Rs 1,21,210 crore worth of outflows in 2024.

This persistent exit of foreign capital comes even as Indian markets have shown relative resilience, with benchmark indices maintaining elevated levels amid strong domestic inflows and robust earnings forecasts.

However, analysts believe the FII strategy reflects a combination of valuation concerns and global allocation shifts.

According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “Sustained FPI selling continued in September with the sell figure through exchanges touching Rs 27163 crores. However, in keeping with the long-term trend of buying through the primary market, FIIs bought equity for Rs 3278 crores in September. The sales in September take the total sell figure for 2025 to Rs 198103 cr. This massive selling on top of the Rs 121210 crore selling in 2024 takes the total FII selling to Rs 319313 crores for the last 21 months.”

Vijayakumar attributed the shift in FII flows to underperformance in Indian markets relative to global peers.

“It is important to understand that the FII strategy of selling in India and moving the money to other markets has paid rich dividends to FIIs since India has been underperforming most markets during the last one year, with a one-year return in negative territory,” he said.

He further added that valuation gaps have also contributed to the redirection of foreign flows. “Higher valuations in India and cheaper valuations elsewhere have been the principal drivers behind the FII strategy. Now that the valuation differential has come down and Indian earnings are likely to improve in FY27, FIIs are likely to slow down selling, going forward.”

While near-term volatility due to FII activity may persist, market participants will be watching closely for signs of moderation in outflows as valuations stabilise and the corporate earnings outlook improves.

Also read: Goldman Sachs initiates coverage on Data Patterns, PTC Industries and 6 other Indian defence stocks, sees up to 58% upside

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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