Are FPIs Offloading Rs 16,422 Crore Last Week? Analysts Predict a Sentiment Reversal Soon!
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Synopsis
In a surprising turn of events, FPIs divested Rs 16,422 crore from Indian equities last week, raising concerns among investors. However, experts believe that sentiment may soon shift positively as India's economic indicators show signs of recovery. This article delves into the reasons behind this significant outflow and what it means for the future.
Key Takeaways
- FPIs offloaded Rs 16,422 crore last week from Indian equities.
- Concerns over US government policies and valuations drove the outflow.
- Analysts forecast a potential sentiment reversal soon.
- Record bookings and reduced GST rates may lead to a market recovery.
- Expect earnings growth to pick up from Q3 FY26.
Mumbai, Sep 28 (NationPress) Foreign portfolio investors (FPIs) divested a staggering Rs 16,422 crore in Indian equities last week due to worries over valuations and new US government policies. However, analysts believe that this trend might soon reverse. A $100,000 fee on new H-1B visa applications, along with elevated tariffs on branded pharmaceuticals, has raised red flags for FPIs concerning potential earnings pressure in India's IT and pharmaceutical sectors.
The benchmark indices witnessed their most significant weekly drop in seven months as a result of ongoing outflows, with Indian equities trailing behind emerging markets by nearly 26 percent year-to-date when measured in dollars.
Continuous FPI selling, coupled with global trade disputes and pressures on specific sectors, has dampened overall sentiment, analysts noted.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that FPIs have pulled out $21 billion from India over the past year, marking the highest outflow among emerging markets during this period.
This FPI exodus has also significantly contributed to a 3.5 percent depreciation of the INR against the dollar. The high valuations in India compared to other markets and sluggish earnings growth are the main factors driving this withdrawal, he explained.
In the initial three months of 2025, FPIs were net sellers, but they shifted to buyers in the subsequent quarter. However, they have reverted to selling in July, August, and September.
The depreciation of the Indian rupee, in contrast to the appreciation seen in other emerging market currencies, has intensified the pressure, he added.
On a positive note, record automobile bookings, reduced GST rates, and affordable credit are igniting a recovery in the automotive and white goods sectors. Such developments are expected to foster superior earnings growth, which the market and FPIs will likely begin to factor in, with further rupee depreciation seeming improbable.
“It is reasonable to conclude that we are approaching the bottom of the FPI outflow,” Vijayakumar stated, forecasting that earnings growth in India is anticipated to gain traction from Q3 FY26, gathering momentum into FY27.
Point of View
It's crucial to remain informed about the fluctuations in foreign portfolio investments. The trends indicate a complex interplay between international policies and local market conditions. While recent outflows raise concerns, the potential for recovery is also on the horizon, emphasizing the need for vigilance and strategic investment decisions.
NationPress
28/09/2025
Frequently Asked Questions
What caused the recent FPI outflow from India?
The outflow was primarily driven by concerns over valuations and new U.S. government policies, including a high fee on H-1B visa applications and increased tariffs on pharmaceuticals.
How much have FPIs withdrawn from India in the last year?
FPIs have withdrawn approximately $21 billion from India over the past year, marking the largest outflow among emerging markets.
What is the outlook for foreign investments in India?
Analysts predict a potential sentiment reversal as indicators of economic recovery emerge, particularly in the automotive and white goods sectors.
How does FPI activity affect the Indian rupee?
The large outflow of FPIs has contributed to a depreciation of the Indian rupee against the dollar, impacting market sentiment.
What sectors are expected to recover in India?
The automotive and white goods sectors are showing signs of recovery due to factors like record bookings, reduced GST rates, and affordable credit.
