Indian mutual fund investors withdrew approximately 177.41 billion Indian rupees from domestic equities in July, as per the National Securities Depository Limited (NSDL) data.
In a significant shift for the Indian equity market, Foreign Portfolio Investors (FPIs) turned net sellers in July 2025, with a total outflow of ₹17,741 crore. This is the first month of negative investment by FPIs after three consecutive months of positive inflows during April, May, and June.
The recent selling pressure is largely due to cautious sentiment amid global macroeconomic uncertainties, stretched valuations in the secondary market, and India’s underperformance relative to other emerging markets and the MSCI Emerging Markets (EM) Index.
Analysts suggest that FPIs shifted their portfolios towards safer assets like bonds, evident from the purchase of $959 million in bonds against a net equity sell of $168 million in the first half of July 2025. This preference for locking better yields amid global risks reflects a risk-averse approach by FPIs.
Moreover, valuation concerns in the secondary market and relative market underperformance are other key factors contributing to this net selling. FPIs sell when secondary market valuations become stretched but continue to buy in the primary market where valuations are perceived as fairer.
Between 28 July and 1 August, foreign investors pulled out ₹17,390.6 crore from Indian equities, further intensifying the selling pressure. Global economic developments and geopolitical tensions between US and Russia will continue to impact FPI behavior in the coming weeks.
It is worth noting that May saw the highest FPI inflows in 2025, with ₹19,860 crore invested in the Indian equity market. However, January witnessed the largest sell-off, with net selling of ₹78,027 crore. The recent selling pressure by FPIs has increased the total net outflow in 2025 to ₹1,01,795 crore.
Despite the net selling in equities, FPIs remained active buyers in the primary market through Initial Public Offerings (IPOs) and Qualified Institutions Placement (QIPs), indicating a valuation-sensitive approach.
As the global economic landscape continues to evolve, the behavior of FPIs will remain a critical factor for the Indian equity market. Investors and market participants will closely watch FPI behavior in the coming months to gauge the market's direction.
- The economic uncertainties and risk-averse attitude of Foreign Portfolio Investors (FPIs) have led them to prefer safer assets like bonds over stocks in the Indian equity market.
- The recent net selling of stocks by FPIs, totaling ₹17,741 crore in July 2025, is a significant shift after three consecutive months of positive inflows, due to caution amid global macroeconomic uncertainties and stretched valuations.
- Global economic developments and geopolitical tensions, such as those between the US and Russia, will continue to impact FPI behavior in the coming weeks and months.
- Analysts suggest that FPIs shift their portfolios towards safer assets, such as bonds, when the secondary market valuations become stretched, but they continue to buy in the primary market where valuations are perceived as fairer.
- The Indian equity market witnessed its highest FPI inflows in 2025 during May, with ₹19,860 crore invested, but also the largest sell-off in January, with net selling of ₹78,027 crore.
- The increased selling pressure by FPIs has resulted in a total net outflow of ₹1,01,795 crore in 2025, but FPIs remain active buyers in the primary market through Initial Public Offerings (IPOs) and Qualified Institutions Placement (QIPs).
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