Foreign investors (FPIs) withdrew ₹12,257 crore from the Indian stock market in the first week of September. The market came under pressure due to a strengthening US dollar, tariffs, and geopolitical tensions.
FPI Update: In the very first week of September 2025, Foreign Portfolio Investors (FPIs) withdrew ₹12,257 crore, or approximately $1.4 billion, from the Indian stock market. Experts attribute this to several global and domestic reasons. The most significant impact was seen from the strengthening US dollar, new US tariff policies, and geopolitical tensions.
Selling for the Third Consecutive Month
In August, FPIs had withdrawn ₹34,990 crore from the Indian market. Prior to that, ₹17,700 crore was withdrawn in July. This means a substantial amount of investment has flowed out in just three months. The total withdrawal in 2025 has now reached ₹1.43 trillion. This is a cause for concern for the Indian market, as foreign investment has long supported market growth.
Reasons for Reduced Investment
Market experts believe that several factors contributed to this aggressive selling by foreign investors.
- Dollar Strength – The US dollar has put pressure on Asian currencies in recent times. The weakening rupee made it easier and more profitable for foreign investors to withdraw from the Indian market.
- US Tariff Tensions – New tariffs imposed by the US have increased global uncertainty.
- Geopolitical Tensions – Ongoing disputes and tensions between several countries have increased market risk.
- Slowing Corporate Earnings – Quarterly results from Indian companies were weaker than expected, making stock valuations appear high and prompting investors to book profits.
Experts' Opinions
Vakarjaved Khan, Senior Fundamental Analyst at Angel One, stated that comments from the US Federal Reserve in the coming weeks, US labor market data, and the Reserve Bank of India's (RBI) policy on interest rates will play a crucial role. Furthermore, whether the rupee shows stability will also determine the stance of foreign investors.
Himanshu Srivastava, Associate Director at Morningstar Investments, believes that short-term volatility will persist. However, in the long term, prospects such as India's growth, GST reforms, and dividend growth could attract FPIs back.
Support from Domestic Investors
V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, said that Domestic Institutional Investors (DIIs) are continuously buying. This is why foreign investors are selling at high valuations and investing in cheaper markets like China, Hong Kong, and South Korea.
Activity in the Debt Market
Despite withdrawals from the equity market, FPIs invested ₹1,978 crore in the debt market, although ₹993 crore was also withdrawn. This indicates that investors are currently prioritizing safer, lower-risk options over stocks.
