FPIs pull out ₹21,000 Cr from equities in August; rupee, weak earnings blamed

After pouring in funds between March and June, FPIs have now turned sustained sellers, pulling money out of IT but holding on to banking and financials. Debt inflows, however, continue to offer some relief to markets.

New Delhi: Foreign investors offloaded Indian equities worth nearly Rs 21,000 crore in the first half of August, pressured by US-India trade tensions, lacklustre first-quarter corporate earnings, and a weakening rupee.

With this, the total outflow by Foreign Portfolio Investors (FPIs) in equities reached the Rs 1.16 lakh crore mark so far in 2025, according to data with the depositories.

The FPI activity will be influenced by the action on the tariff front ahead.

The recent easing of tensions between the US and Russia, coupled with the absence of fresh sanctions, suggests that the proposed 25 per cent secondary tariff on India is unlikely to take effect after August 27, a clear positive for the market, Vaqarjaved Khan, CFA - Senior Fundamental Analyst, Angel One, said.

Also, S&P has upgraded India's credit rating from BBB- to BBB, a move that could further boost FPIs' sentiment, he added.

According to the depositories data, foreign portfolio investors (FPIs) withdrew a net sum of Rs 20,975 crore from equities this month (till August 14).

This came after a net withdrawal of Rs 17,741 crore in July. Before that, FPIs invested Rs 38,673 crore in the preceding three months from March to June.

"The sustained outflows are being driven primarily by a confluence of global uncertainties. Heightened geopolitical tensions and ambiguity surrounding the interest rate trajectory in developed economies, particularly the United States, have contributed to a risk-averse sentiment," Himanshu Srivastava, Associate Director - Manager Research, Morningstar Investment Research India, said.

Adding to this caution is the recent strengthening of the US dollar, which tends to reduce the relative attractiveness of emerging market assets like India's, he noted.

Additionally, tepid earnings growth and elevated valuations have contributed to the outflow, VK Vijayakumar, Chief Investment Strategist, Geojit Investments, said.

On the sectoral front, sustained selling in IT stocks has pulled the IT index down. However, banking and financials continue to be relatively resilient due to fair valuations and institutional buying.

On the other hand, FPIs invested Rs 4,469 crore in the debt general limit, and pumped Rs 232 crore into the debt voluntary retention route during the period under review.