The BRICS TimesForeign investors continued their selling spree in the very first week of September, pulling out large sums from Indian equities. A stronger dollar and concerns over US tariffs are eroding investor confidence in Indian markets.
Amid global uncertainty, investors are once again retreating from the Indian stock market, continuing a trend of heavy sell-offs. In just the first week of September, foreign portfolio investors (FPIs) withdrew a massive ₹12,257 crore from Indian equities. The strengthening of the US dollar and persistent worries about American tariff policies have been key drivers behind this wave of withdrawals.
This comes on the back of earlier sell-offs, as overseas investors had already pulled out ₹34,990 crore in August and ₹17,700 crore in July. According to depository data, the cumulative outflow from equities by FPIs in 2025 so far has reached an alarming ₹1.43 lakh crore. Commenting on the trend, Angel One’s Senior Analyst, Waqar Javed Khan, said, “Whether or not FPI inflows return to the Indian market next week will depend on the US Federal Reserve’s remarks, the latest American job market data, expectations of an interest rate cut by the RBI, and the stability of the Indian rupee.”
Meanwhile, Himanshu Srivastava, Associate Director at Morningstar Investment, pointed out that although the market may experience short-term volatility, India’s strong growth narrative, reforms like GST, and the improving earnings potential of companies could once again lure FPIs back to Indian shores. However, he also stressed that this recovery in foreign interest will only be possible once the cloud of global uncertainty begins to clear.
When it comes to their investment choices, experts explain that FPIs have been booking profits at high valuations in India due to sustained buying by domestic institutional investors (DIIs), and are instead shifting their capital towards cheaper markets such as China, Hong Kong, and South Korea. As Geojit Investments’ Chief Investment Strategist, V.K. Vijayakumar, noted, “Continuous buying from DIIs has encouraged FPIs to book profits at elevated valuations, prompting them to allocate funds to more affordable markets like China, Hong Kong, and South Korea.” Data further shows that during this period, FPIs invested ₹1,978 crore in the bond market, but at the same time withdrew ₹993 crore through the Voluntary Retention Route.
The stock market itself has reflected this air of uncertainty. While foreign investors have been pulling out their funds, Indian investors have simultaneously been injecting capital into equities. On the most recent trading day, the market ended with a marginal dip. The benchmark Sensex slipped by 7.25 points, closing at 80,710.76, highlighting the fragile mood prevailing among investors.
