Sustained FPI Outflows Trigger Volatility in Indian Equities

Foreign portfolio investors (FPIs) continued to exit the Indian stock market in February, pulling out Rs 34,574 crore, driven by a stronger US dollar and economic concerns. Despite a brief net buying stint, 2025 continues to see significant outflows, alarming market participants and leading to volatility.

Foreign portfolio investors continued their exodus from the Indian stock market in February, offloading equities worth Rs 34,574 crore, according to data from the National Securities Depository Limited (NSDL). This selling trend was pronounced during the last week of February, with FPIs selling Rs 10,905 crore in that period alone.

On Friday, a shift occurred as foreign investors became net buyers, injecting Rs 1,119 crore into the market. Despite this influx, Indian stocks fell sharply, with both the Nifty and Sensex indices dropping over 1.8 percent. So far in 2025, FPIs have offloaded equities totaling Rs 1,12,601 crore, underscoring a persistent withdrawal pattern.

The strengthening of the US dollar and negative economic projections for India have contributed to the cautious investor outlook, resulting in sustained selling. These FPI outflows have disrupted market stability, contributing to volatility in Indian equities.

In January, FPIs extracted Rs 78,027 crore from Indian markets. December's positive net investment by FPIs of Rs 15,446 crore marked a bullish end to 2024. However, net buying drastically fell to Rs 427 crore, reflecting returning investor caution.

The ongoing sell-off by FPIs, raising alarms among investors, can be linked to global uncertainties, rising US bond yields, and geopolitical tensions. The reemergence of Donald Trump in US politics has buoyed confidence in the US economy, contributing to the outflow.

Moreover, investors are gravitating towards safer assets, leading to increased outflows from emerging markets like India. FPI inflows saw a significant decline, dropping by 99 percent in 2024 compared to the previous year, emphasizing the shift in market sentiment. (ANI)

(With inputs from agencies.)