Why Foreign Investors Pulled Out Rs 22,194 Crore from Indian Stocks in January? Full Details

Foreign Portfolio Investors (FPIs) offloaded ₹22,194 crore worth of Indian equities this month (till January 10), data from depositories reveals. The outflows follow a ₹15,446 crore investment in December. FPIs have been sellers on all trading days in January except January 2.

"This exodus of foreign money from Indian markets could be attributed to a multitude of factors, such as the expectation of yet another weak earnings season, concerns over the tariff war under Trump's presidency, GDP growth slowdown, persistently high inflation numbers, and uncertainty over the timing of interest rate cuts in India," said Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India as mentioned in the report by PTI.

Global and Domestic Challenges Weigh on FPIs

FPIs have scaled back investments amid mounting global and domestic headwinds. Factors such as the strengthening US dollar, which pushed the dollar index above 109, and the surge in US 10-year bond yields to over 4.6%, have drawn capital away from emerging markets like India.

"The single major reason for the relentless selling by the FPIs is the steady rise in the dollar index, which is above 109 now. The surge in the 10-year bond yield to above 4.6% is ensuring capital flows from emerging markets like India," noted V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services as mentioned in the report by PTI. 

Sharp Contrast to 2023’s Record Inflows
The cautious stance of foreign investors contrasts sharply with 2023 when FPIs poured in ₹1.71 lakh crore amid optimism over India’s strong economic fundamentals. In 2024, net inflows amounted to a modest ₹427 crore, as per the report by PTI. 

Additionally, the rupee's depreciation, surging US bond yields, and Indian equities' rich valuations have contributed to making Indian markets less attractive to foreign investors.