FPIs Withdraw ₹30,000 Crore from Equities in March

Foreign investors have continued to withdraw funds from the Indian equity market, pulling out over ₹30,000 crore in the first half of the month due to escalating global trade tensions.

This follows withdrawals of ₹34,574 crore in February and ₹78,027 crore in January. Consequently, the total foreign portfolio investor (FPI) outflow has reached ₹1.42 lakh crore (approximately $16.5 billion) in 2025 so far, as per depository data.

Between March 1 and March 13, FPIs offloaded shares worth ₹30,015 crore, marking the 14th consecutive week of net outflows.

Factors Driving FPI Outflows

The persistent selling pressure is attributed to a mix of global and domestic factors. Concerns over US trade policies under President Donald Trump, particularly fears of a tariff-induced recession, have dampened global risk appetite, leading FPIs to be cautious about emerging markets like India, according to Himanshu Srivastava, Associate Director - Manager Research at Morningstar Investment.

Additionally, rising US bond yields and a strong dollar have made American assets more attractive to investors. The depreciation of the Indian rupee has further contributed to this trend, as it reduces returns for foreign investors.

Another major reason for the outflows is the recent shift in global investment patterns. China, which struggled with economic concerns in 2023 and 2024, has seen a resurgence in investor confidence, drawing FPIs away from India. Some analysts believe that Beijing’s pro-growth policies and market-friendly reforms have made Chinese equities more attractive.

Moreover, global uncertainties such as geopolitical tensions, supply chain disruptions, and fluctuating oil prices have added to investor concerns. Many foreign investors are choosing to park their funds in safer assets such as US Treasury bonds and gold rather than taking risks in volatile emerging markets.

Market Implications

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPIs have been redirecting funds into Chinese stocks, which have outperformed other markets in 2025. He added that while the recent decline in the dollar index might restrict fund flows to the US, heightened uncertainty from the ongoing trade war could push more investments into safe-haven assets such as gold and the dollar.

Despite these outflows, domestic institutional investors (DIIs) have helped stabilize the market to some extent by increasing their purchases. Mutual funds and insurance companies have stepped in to absorb some of the selling pressure, preventing a sharper decline in Indian equities.

Meanwhile, FPIs invested ₹7,355 crore in the debt general limit but withdrew ₹325 crore from the debt voluntary retention route. The preference for debt instruments suggests that investors are still looking for stable returns in India’s fixed-income market, even as they pull money from equities.

A Look at Past Trends

The overall pattern reflects a cautious stance among foreign investors, who significantly reduced their investments in Indian equities in 2024, with net inflows amounting to just ₹427 crore. This is in stark contrast to the strong ₹1.71 lakh crore net inflows recorded in 2023, driven by optimism about India’s robust economic fundamentals. By comparison, 2022 saw net outflows of ₹1.21 lakh crore due to aggressive rate hikes by global central banks.

Despite the ongoing FPI withdrawals, experts believe that India’s long-term growth story remains intact. Strong GDP growth, rising consumer demand, and structural reforms could attract foreign investors back in the coming months, especially if global uncertainties ease. However, much will depend on how India navigates external challenges and whether domestic markets continue to offer competitive returns compared to other emerging economies.