Amid Heavy Selloff, FPIs Selectively Accumulate Indian Stocks

Although heavy outflows from Indian equities have been witnessed in 2025, overseas portfolio investors have chosen to up their stakes in a few selective stocks, indicative of their nuanced approach to investing in the volatile global market.

Massive Outflows Amid Global Turmoil

While such driving factors are that the global economies remain uncertain owing to surging U.S. bond yields, strengthening of the dollar, and rising concerns over elevated valuations in India. FPIs have withdrawn approximately ₹1.5 lakh crore from Indian equities in 2024-25; it is the largest annual outflow ever recorded in the Indian capital market.

FPIs sold ₹78,027 crore worth of equities in January 2025 and ₹34,574 crore in February to make further sales. Massive outflows like these have pulled the BSE Sensex index down more than 6% this year.

Global investors started feeling risk-averse as market volatility became even worse when the United States enforced high tariffs on various trade items.

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Domestic Investors Provide Market Stability

Domestic institutional investors (DIIs), primarily retail money-dependent mutual funds, continued to provide support to the market during the period when FPIs were net sellers. In the first eleven days of April, DIIs purchased ₹340 billion worth of stocks, nailing down further parts, even if not completely, of the FPI outflows.

Selective Accumulation in The Financial Sector

Despite the wide sellout, FPIs have shown great confidence in some sectors and investment avenues. They have been net buyers of the primary market, investing a net of $189.6 million (₹1,654.5 crore) in the first half of March 2025. For the fiscal year, cumulative investments in the primary market amounted to $14.34 billion (almost ₹1.2 lakh crore). ​

In the financial sector, FPIs have shown a paradoxical behaviour. While they have been net sellers overall, they have also increased holdings in select financial stocks, recognizing the sector's strong performance and attractive valuations. This indicates a strategic reallocation rather than a complete exit. 

Increased Stakes in Select Stocks

FPIs have also increased their holdings in specific companies. For instance, Fairfax-backed CSB Bank saw FPI holdings rise by 800 basis points to 13.07% in FY25, with significant investments from Amansa Holdings and Ashoka Whiteoak India Opportunities Fund. ​

Other companies that have attracted sustained interest from overseas investors include Azad Engineering, Transformers and Rectifiers India (TARIL), Marksans Pharma, Paradeep Phosphates, Paras Defence, Endurance Technologies, Parsvnath Developers, and Thermax. These stocks have managed to defy the broader bearish sentiment in Indian equities. ​

Analysts' Perspective

Market analysts express that while FPIs are cautious owing to global economic conditions, they are selectively investing in sectors and stocks with sound fundamentals and good growth potential. Such selective buying indicates a long-term view on the economic resilience of India.

Conclusion

In the face of global uncertainties, FPIs continue to withdraw money from Indian equities; however, their chosen investments in specific sectors and stocks signal a carefully considered act of investing that balances caution with an optimistic view of India's long-term growth.