Massive Selloff: FPIs dumps ₹2,700 crore per day from Indian stocks!

In February 2025, Foreign Portfolio Investors (FPIs) continued their selling streak, pulling out ₹41,748 crore from Indian stocks—marking their fifth consecutive month of withdrawal. This has caused the Nifty 50 and Sensex to drop by 6%, with broader markets facing even steeper declines. Concerns about global trade tensions, high valuations, and weak earnings have fueled the outflow, with FPIs remaining net sellers in 43 of 46 sessions so far this year.

The heavy selloff culminated on February's final trading day, with FPIs dumping ₹11,639 crore—setting a new record for 2025. In total, they have withdrawn ₹1,23,652 crore from Indian exchanges this year, averaging ₹2,688 crore in daily outflows.

Despite the efforts of domestic institutional investors (DIIs) to absorb the pressure, market recovery remains elusive. As family offices, high-net-worth individuals (HNIs), and retail investors also exit the market to protect their margins, DIIs are left to bear the brunt of the selling.

The selling by FPIs has hit Indian equities hard, dragging both the Nifty 50 and Sensex down by 6% in February—marking their largest monthly drop since October 2024. As of now, both indices have seen a 16% correction from their peaks, continuing a downward trend for five consecutive months.

The broader market, especially the Nifty Midcap 100 and Nifty Small-Cap 100 indices, has suffered even worse, down by 25% from their all-time highs. The Indian rupee has also been under pressure, depreciating nearly 0.9% in February.

Global Factors Drive FPI Outflows

The continued selling is being driven by several factors, including escalating global trade tensions, disappointing earnings from Indian companies, rich valuations, and a slowdown in economic growth. These elements have all contributed to a decline in investor sentiment, with increased risk aversion across the board.

Declining FPI Holdings in Large-Cap Stocks

Despite withdrawing substantial amounts from the Indian market, FPIs still hold a significant portion of Indian equities—around $800 billion worth. This, however, raises concerns about sustained market pain if the selling trend continues.

FPI ownership in Nifty 50 companies fell to a 12-year low of 24.3% in the December 2024 quarter. Similarly, holdings in large-cap stocks saw a 30 basis point drop, indicating that FPIs are increasingly targeting larger companies.

Shift in Investor Focus to China

Reports indicate that overseas investors are redirecting funds toward Chinese markets, attracted by Beijing's recent policy measures and hopes of an economic recovery. Additionally, China’s emergence as a technology hub, especially with the rise of AI startups like DeepSeek, is boosting investor sentiment in the region.

Volatility to Persist Amid Uncertainty

According to Vipul Bhowar, Senior Director at Waterfield Advisors, elevated valuations and uncertain corporate earnings growth have kept FPIs on the sidelines. With commodity prices falling, consumer spending slowing, and rising US bond yields, investors are increasingly shifting their focus to US assets, leading to further outflows from Indian equities.

Experts expect market volatility to persist as FPIs wait for signs of recovery. Given the global and domestic challenges, the road to market stabilization remains uncertain.

Disclaimer: Investors are advised to consult certified experts before making any investment decisions.

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