Foreign investors have once again soured on the Indian markets, leading to significant selling. Following substantial investment in May, Foreign Portfolio Investors (FPIs) withdrew a massive ₹8,749 crore from the Indian equity market in the first week of June.
Stock Market: The mood among Foreign Portfolio Investors (FPIs) in the Indian stock market has turned negative. After heavy investment in May, FPIs withdrew approximately ₹8,749 crore from Indian markets in the first week of June. Experts attribute this outflow to escalating US-China trade tensions and a rise in US bond yields, prompting foreign investors to exit the Indian stock market.
Why the Shift in Investor Sentiment?
In May 2025, foreign investors poured ₹19,860 crore into the Indian equity market, representing b investment since the beginning of the year. April also saw investments of ₹4,223 crore. However, the sudden withdrawal of ₹8,749 crore in the first week of June significantly impacted market sentiment.
Market experts suggest this withdrawal is due to rising US-China trade tensions and increasing US bond yields. Higher bond yields incentivize investors to seek safer options, reducing investment in the stock market.
Total Net Withdrawal Exceeds ₹1 Lakh Crore in 2025
FPIs also withdrew ₹34,574 crore and ₹78,027 crore in February and January respectively. March saw a further withdrawal of ₹3,973 crore. These withdrawals mean that FPIs have withdrawn over ₹1.01 lakh crore from the Indian stock market in 2025 so far.
Despite this, the market showed positive momentum on Friday. The BSE Sensex closed at 82,188.99, up 746.95 points, while the NSE Nifty reached 25,003.05, up 252.15 points. This indicates that domestic investors and other factors are still supporting market potential.
Analysis by Market Experts
Himanshu Srivastava, Associate Director at Morningstar Investment, stated that the renewed US-China trade tensions and the sharp increase in US bond yields have prompted foreign investors to shift their capital towards safer assets. He added that fears of a global economic slowdown are making investors cautious, leading them to avoid risky markets.
Furthermore, recent reports of investigations against the Adani Group in the US have eroded foreign investor confidence. This raises concerns about India's business stability among investors.
Relief from RBI's Repo Rate Cut
However, the Reserve Bank of India (RBI)'s recent 0.50 percent repo rate cut has provided some market stability. This has lowered interest rates and made borrowing cheaper, which is expected to stimulate economic growth. Despite this positive news, global instability and geopolitical tensions continue to make investment in the Indian market risky for foreign investors.
What Lies Ahead?
Experts believe that FPI withdrawals may continue until the global economic environment stabilizes. US-China trade tensions, high bond yields, and geopolitical events such as the Adani investigation are increasing investor uncertainty. India needs domestic investors and policymakers to remain vigilant to maintain economic and financial stability.
Additionally, the government needs to strengthen transparency, ease of doing business, and investor protection measures to regain foreign investor confidence.
Suggestions for Investors
Analysts suggest investors adopt a long-term perspective. Market fluctuations are normal, and India's market still holds potential due to ongoing economic reforms. Domestic investors should exercise caution and make informed decisions based on market signals. Foreign investors may need to adjust their strategies in light of global economic risks.
