Foreign portfolio investors (FPIs) continued to withdraw from the Indian equity markets in February as global trade concerns mounted with US President Donald Trump imposing fresh tariffs on several countries such as China and Canada.
Official depository data revealed that the investors dumped Indian equities worth more than Rs 7,300 crore in the first week of the month till February 7, 2025. Meanwhile, the FPIs emerged as buyers in the debt market and infused Rs 1,215 crore in the debt general limit and Rs 277 crore in the debt voluntary retention route (VRR) in the same period.
This outflow followed an exodus of Rs 78,027 crore from the equity markets in January. In December 2024, the investors infused Rs 15,446 crore in the capital markets, reported PTI.
Experts noted that market sentiment will be impacted by global macroeconomic developments, currency fluctuations, and domestic policy measures going ahead. The exact withdrawal from the primary market during February so far stood at Rs 7,342 crore.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India, noted that the global trade concerns triggered by tariffs from Trump’s government led to more fears of a potential trade war. This uncertainty in the markets triggered a cautious sentiment among global investors, leading to investors exiting emerging markets like India.
“Further exacerbating the situation, the Indian rupee depreciated sharply, breaching Rs 87 per US dollar mark for the first time. A weaker rupee erodes returns for foreign investors, making Indian assets relatively less attractive and adding to the pressure on FPI lows,” the expert added.
V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, stated that a robust dollar index and elevated US bond yields continued to force the investors to withdraw front he markets. “Going forward, FPIs are likely to reduce their selling since the dollar index and US bond yields are indicating a softening trend. The sentiments in the Indian market would slowly improve in response to the Budget announcement and the rate cut by the Reserve Bank of India (RBI). The victory of the BJP in the Delhi elections is likely to positively impact the market in the short run. However, the medium to long-term trend in the market will depend on the recovery in GDP growth and earnings recovery,” Vijayakumar explained.
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