Foreign Investors Exit Indian Stocks at Record Scale; Withdraw ₹1.6 Lakh Cr in 2025
In 2025, foreign investors have executed their most significant retreat from Indian equities, with net outflows surpassing ₹1.58 lakh crore. This unprecedented exodus is attributed to a combination of factors, including exchange selling, a weakening rupee, and shifts in global capital. Despite consistent domestic flows, Foreign Institutional Investors (FIIs) are set to conclude the year with record-breaking net outflows, marking the most substantial annual net selling since they commenced investing in India.
As of December 27, 2025, FIIs have sold equities worth ₹22,130 crore through exchanges, bringing the total equity sales for the year to ₹2,31,990 crore. While primary market investments amounted to ₹73,583 crore, the net outflow remains a staggering ₹1,58,407 crore. The scale of these outflows has been described as the worst selling by FIIs since they began investing in India.
The significant withdrawal has exerted downward pressure on the rupee, making it the weakest currency in Asia. Concerns regarding delays in US-India trade deals and relatively high stock valuations have further contributed to India's diminished attractiveness for foreign funds. Year-end portfolio rebalancing has also played a role in the substantial outflows. Geopolitical uncertainties and shifting US trade policies, along with intermittent tariff threats, have further exacerbated the situation.
Additionally, India's role as a funding market for Artificial Intelligence (AI) in Asia has led investors to reallocate capital towards Korean or Taiwanese stocks. An HSBC report indicated nearly $28 billion in outflows from India between September 2024 and November 2025, reducing foreign ownership of Indian equities to below 17%, a 14-year low.
Despite the foreign sell-off, the Indian market has demonstrated resilience, with the Sensex and Nifty50 rising over 7% and 8%, respectively. This is largely due to strong participation from domestic investors, who have effectively offset the impact of foreign outflows. Data indicates that FPIs now own just 16.9% of NSE-listed companies, their lowest share in over 15 years as of September 2025. Conversely, domestic mutual funds invested ₹1.64 lakh crore, pushing their ownership to record highs in Nifty 50 and Nifty 500 companies.
Looking ahead, some analysts anticipate a potential rebound in foreign interest in 2026, driven by India's continued economic growth. Experts suggest that as valuations become more reasonable, the prospects for renewed foreign investment may improve.
