Foreign Investors Flee Indian Equities Amid Record Withdrawals

In 2025, foreign investors withdrew a record Rs 1.6 lakh crore from Indian equities due to volatile currency, global trade tensions, and stretched valuations. The outlook for 2026 is optimistic, with expected positive flows, driven by economic reforms, policy continuity, and potential interest rate cuts.

In an unprecedented move, foreign investors withdrew a staggering Rs 1.6 lakh crore from Indian equities in 2025, citing currency volatility, global trade tensions, and stretched valuations as key reasons for the exodus. The outflows mark a record high, surpassing previous withdrawal records.

Despite this, experts anticipate a reversal in 2026. Economic reforms, expected interest rate cuts, and policy continuity could attract foreign portfolio investors back to Indian markets. Additionally, easing trade tensions with the US and a softer dollar are also expected to boost investor confidence.

Analysts point to both global and local dynamics influencing investment trends. Elevated US interest rates and bond yields, geopolitical uncertainties, and domestic valuation pressures have collectively deterred equity investments but favored the debt market, where foreign investments saw significant inflows due to attractive yield differentials.

(With inputs from agencies.)