Foreign Investors Withdraw Billions from Indian Equities Amid Currency Concerns

In a significant development, foreign investors have withdrawn Rs 11,820 crore from Indian equities in the first week of December, primarily due to concerns over the depreciating rupee. This follows a net outflow of Rs 3,765 crore in November and comes after a brief period of investment in October. Despite these withdrawals, strong domestic participation has helped cushion the market impact. Analysts highlight that year-end portfolio adjustments and delays in the India-US trade deal are contributing factors. The RBI's recent rate cut has also influenced market sentiment positively. As global liquidity conditions evolve, India may stand to benefit, although uncertainties remain.

By Narendra Chaudhary Dec 7, 2025, 15:07 IST

Significant Outflows from Indian Markets

New Delhi: In a notable shift, foreign investors have withdrawn approximately Rs 11,820 crore (around USD 1.3 billion) from Indian equities during the first week of this month, largely due to the significant depreciation of the rupee.

This recent withdrawal follows a net outflow of Rs 3,765 crore recorded in November, adding further strain to the markets.

These outflows come after a brief period of recovery in October, when foreign portfolio investors (FPIs) injected Rs 14,610 crore, breaking a three-month trend of substantial withdrawals—Rs 23,885 crore in September, Rs 34,990 crore in August, and Rs 17,700 crore in July.

Data from NSDL indicates that FPIs have now pulled a total of Rs 1.55 lakh crore (USD 17.7 billion) from Indian equities in 2025.

Analysts suggest that the renewed selling pressure is primarily linked to concerns over currency fluctuations.

The rupee has depreciated nearly 5% this year, prompting FPIs to withdraw during such downturns, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Additionally, the typical year-end portfolio adjustments by global investors ahead of the holiday season have exacerbated the selling trend, as noted by Vaqarjaved Khan, Senior Fundamental Analyst at Angel One.

Khan also pointed out that delays in finalizing the India-US trade agreement have further dampened global market sentiment.

Despite the FPI exodus, the impact on the markets has been mitigated by strong domestic participation. Domestic Institutional Investors (DIIs) purchased equities worth Rs 19,783 crore during the same timeframe, effectively counterbalancing the foreign sell-off, according to Vijayakumar.

The confidence of DIIs has been bolstered by India's strong GDP figures and optimistic expectations for corporate earnings in the near future.

The sentiment received an additional boost following the Reserve Bank of India's (RBI) 25-basis point rate cut on December 5, which saw FPI flows turn positive for the day at Rs 642 crore.

This shift was particularly noteworthy, given that FPIs had sold nearly Rs 13,000 crore by December 4.

"The RBI not only lowered rates but also raised its FY26 growth forecast to 7.3%, while reducing its CPI prediction to 2%. A robust growth environment is favorable for Indian equities," Khan stated.

Looking forward, global liquidity may receive another boost. The CME Fed Watch Tool suggests that the Federal Open Market Committee (FOMC) is likely to cut rates by 25 basis points next week, a move that typically benefits risk assets globally.

India could emerge as a significant beneficiary, although the lack of a finalized India-US trade deal remains a risk factor.

In the debt market, FPIs invested Rs 250 crore under the general limit while withdrawing Rs 69 crore through the voluntary retention route during the same period.