Foreign portfolio investors pulled out ₹34,574 crore from the Indian equity markets in February, pushing total outflows to ₹1.12 lakh crore in the first two months of 2025 and analysts warn that unless global economic conditions stabilise, the outflows may continue to weigh on the Indian stock markets.

This came following a net outflow of ₹78,027 crore in January.

“Elevated valuations of Indian equities, alongside concerns about corporate earnings growth, have led to a sustained outflow of FPIs,” Vipul Bhowar, senior director — listed investments, Waterfield Advisors, said explaining the triggers behind the outflow.

The massive selling by FPIs has resulted in the BSE’s benchmark Sensex falling over 6 per cent year-to-date.

The recent market sell-off has been influenced by rising US bond yields, a strengthening US dollar, and global economic uncertainties, leading to a shift in investor focus towards US assets, Bhowar said.

According to him, the earnings reports for the third quarter of fiscal year 2025 have been modest, indicating an atmosphere of uncertainty.

This issue is further compounded by falling commodity prices and reduced consumer spending, which adversely impact corporate profits and diminish the appeal of Indian equities to foreign investors, he added.

“FPIs are focused on selling in India because valuations are high and moving money to Chinese stocks where valuations are much lower. But in the process, they are selling in the best performing sector with attractive valuations,” V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said.

Some experts think that a major factor driving capital away from emerging markets like India is the renewed political influence of President Donald Trump in the US, whose return to the political stage has strengthened investor confidence in the US economy, making it a more attractive investment destination.

An important paradox in FPIs selling is that they are selling heavily in financial services, the sector which is doing well and the valuations are attractive. Additionally, they withdrew money from the debt market. They pulled out ₹8,932 crore from debt general limit and ₹2,666 crore from debt voluntary retention route.

The overall trend indicates a cautious approach by foreign investors.