Foreign Investors Start 2025 on Cautious Note in Indian Equities

Foreign Portfolio Investors began 2025 by selling off Rs 4,285 crore in Indian equities amidst global uncertainties, marking the biggest single-day sell-off this year. This cautious move comes after a drastic 99% decline in investments in 2024, driven by a strong US economy and domestic challenges.

Foreign Portfolio Investors (FPIs) have approached the Indian equity markets with caution as 2025 begins, initiating a substantial net sell-off of Rs 4,285 crore in the first three trading sessions, National Securities Depository Limited (NSDL) data shows.

The year kicked off with significant turbulence as the largest single-day sell-off by foreign investors was recorded on January 1st, when Rs 5,351 crore flowed out of the equity segment. Despite a positive end in December, where FPIs netted Rs 15,446 crore, their overall net buying in 2024 diminished sharply, dropping to a mere Rs 427 crore.

The precipitous drop in 2024's FPI inflows, which plunged by 99% compared to the previous year, can be attributed to the robust performance of the US economy attracting capital towards US bonds and equities, overshadowing emerging markets like India. Higher valuations, slowing GDP growth, and reduced corporate earnings growth further dimmed India's market allure.

As FPIs reassess market conditions amid global and local economic uncertainties, this early sell-off indicates potential volatility ahead for India's equity markets. The drop in FPI inflows highlights the necessity for India to tackle international and domestic challenges to revive foreign investments and stimulate economic growth in the future.

(With inputs from agencies.)