Foreign investors pulled out Rs 34,993 crore (around USD 4 billion) from Indian equity markets in August, making it the sharpest sell-off in six months, weighed down by US tariffs on Indian exports and pricey domestic valuations.

The withdrawal was nearly double the Rs 17,741 crore outflow recorded in July.

With this, the total outflow by Foreign Portfolio Investors (FPIs) in equities reached Rs 1.3 lakh crore mark so far in 2025, data with the depositories showed.

Market experts believe that withdrawals were triggered by a combination of global and domestic factors.

The latest withdrawal was the sharpest since February, when FPIs dumped Indian equities worth Rs 34,574 crore.

"The announcement of steep US tariffs of up to 50 per cent on Indian exports dented sentiment significantly, raising concerns over India's trade competitiveness and growth outlook," Himanshu Srivastava, Associate director - Manager Research, Morningstar Investment, said.

"At the same time, corporate earnings for the June quarter for a few key sectors fell short of expectations, further dampening investor appetite," he added.

According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments, the simple explanation for this massive selling by the FPIs is the relatively high valuations in India compared to valuations in other markets. This is making FPIs to move money to cheaper markets.

It is important to note that FPIs have been sustained buyers in the primary market for long. This year, despite massive selling through the exchanges, they bought equity for Rs 40,305 through the primary market where valuations of the IPOs are fair, he added.

On the other hand, FPIs invested Rs 6,766 crore in the debt general limit and withdrew Rs 872 crore in the debt voluntary retention route during the period under review.

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