Foreign Portfolio Investors (FPIs) remained in selling mode in the Indian share markets, offloading ₹34,574 crore from equities in February 2025. This contributes to a net outflow of ₹1.12 lakh crore for the first two months of the year, pointing towards sustained anxiety regarding the outlook of the Indian market.
Details of the Outflow
According to data from depository sources, FPIs offloaded ₹78,027 crore worth of shares in January 2025, followed by ₹34,574 crore in February. The combined outflow for the first two months of 2025 has thus surged to ₹1,12,601 crore.
The outflow was not limited to equities. FPIs also pulled funds from the bond market, exacerbating the pressure on India’s financial markets. Analysts attribute this trend to a combination of global uncertainties, concerns about U.S. tariffs, and domestic market conditions.
Factors Behind the Sell-Off
The experts opine that the many reasons behind the huge outflow include apprehension over increasing interest rates in the United States, the strength of the dollar, and geopolitical tensions. Even concerns over Indian corporate earnings and international trade patterns have made investors cautious.
Vinod Nair, Head of Research at Geojit Financial Services, in a conversation with Financial Express, noted that investors are closely watching U.S. tariff policies and unemployment claims, which are expected to influence market sentiment in the near term. Nair also highlighted the possibility of further weakness in the markets until the first quarter results of the next fiscal year provide more clarity.
Impact on Indian Markets
FPIs’ persistent selling has seen the market capitalization undergo a sharp contraction, with the aggregate market cap of eight of the top ten most capitalized companies on the BSE shaving off ₹3.09 lakh crore over this period. TCS was one of the worst-hit, illustrating the mood in the broader market.
Market analysts believe that the trajectory of U.S. tariffs, global trends, and FII activities will play a crucial role in determining the course of Indian stock markets in the coming weeks. The HSBC Manufacturing and Services PMI data, set to be released soon, will also be closely monitored by investors.
Outlook for the Coming Months
In the near term, sentiment will likely stay down unless there are some encouraging news flows on the international trade front or Indian corporate earnings beat expectations. The trend of outflows, if sustained, may begin to pose challenges for Indian markets, which have been facing their share of volatility and external pressures.
Analysts advise investors to exercise caution as the market navigates these headwinds, with global cues and FPI activities remaining key factors to watch in the short term.
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