This sharp withdrawal follows a net outflow of Rs 3,765 crore in November, extending the pressure on domestic equity markets.
The current trend comes after a brief pause in October, when Foreign Portfolio Investors (FPIs) infused Rs 14,610 crore, snapping a three-month streak of heavy withdrawals. FPIs sold equities worth Rs 23,885 crore in September, Rs 34,990 crore in August, and Rs 17,700 crore in July.
According to data from the National Securities Depository Ltd (NSDL), FPIs withdrew a net Rs 17,955 crore from Indian equities between December 1-12.
Market experts attributed this sustained outflow to several factors including sharp depreciation of the rupee and rich Indian valuations.
Explaining the outflow, Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, said elevated US interest rates, tighter liquidity conditions, and a preference for safer or higher-yielding developed-market assets have weighed on investor sentiment.
Adding to the pressure, India’s relatively rich equity valuations have made it less attractive compared to other emerging markets that currently offer better value, he added.In addition to these concerns, Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, pointed to weakness in the Indian rupee, global portfolio rebalancing, year-end effects, and lingering macroeconomic uncertainty as key reasons behind the continued pullout.
Despite this persistent foreign selling, the impact on markets has been largely offset by strong domestic institutional investor (DII) participation. DIIs invested Rs 39,965 crore during the same period, effectively eclipsing FPI outflows.
Looking ahead, some market experts believe the selling pressure may ease.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that sustained selling appears unsustainable given India’s strong growth and earnings outlook, suggesting that FPI selling is likely to decline going forward.
Khan added that an expedited US-India trade deal could potentially trigger a reversal in foreign investment trends.
Meanwhile, in the debt market, FPIs withdrew Rs 310 crore under the general limit but invested Rs 151 crore through the voluntary retention route during the same period.
