Foreign portfolio investors have achieved a historic milestone by crossing the ₹2.18 lakh crore net outflow mark for the current year, marking the worst yearly performance since 1993 when FPIs were first allowed to invest in domestic stocks. According to reports from The Times of India, this represents the first time ever that FPIs have reached such a significant outflow level within the first five months of a financial year. The latest data shows ₹14,232 crore in outflows recorded till May 8, adding to the sustained selling pressure that has characterized 2025. As per The Economic Times, this shift has led to India moving from being one of the most popular emerging markets to among the most unloved, with foreign ownership of Indian companies at a 14-year low at 14.7%.
The sustained selling pressure has resulted in foreign holdings in Indian stocks falling to a 14-year low at 14.7%, as reported by JM Financial. This level is significantly below the comparative domestic institutional holding of 18.9%, highlighting the dramatic shift in foreign investor sentiment toward Indian equities. The data from Sebi and NSDL shows that nearly ₹2.18 lakh crore has been withdrawn from India in just over four months until May 8, with the latest figures showing continued outflow momentum. According to The Economic Times, this represents a fundamental change from India's traditional positioning as a TINA (There Is No Alternative) market driven by strong earnings growth, as investors now question why pay top dollar for slower growth when markets like Korea and Taiwan offer cheaper alternatives with AI boom momentum.
The selling pressure has shown distinct monthly patterns throughout 2025, with more than half of the total outflow occurring in March alone. As reported by The Times of India, this surge coincided with the start of the West Asia war and the rupee crashing to below 95/$ level, marking the lowest level ever against the greenback. April saw a slower pace of ₹60,847 crore in outflows, while the total outflow from stocks for the whole of 2025 reached ₹1.7 lakh crore. The latest data from May 8 continues this trend with ₹14,232 crore in fresh outflows. According to The Economic Times, since September 2024, foreigners have pulled out $53 billion, with Goldman Sachs strategists predicting that the likelihood of incremental foreign selling could be limited to about $4-5 billion after a record $22-billion outflow in 2026.
Despite the record outflows, Goldman Sachs analysis suggests the worst may be behind the market. According to their report cited by The Times of India, while the intensity of FPI selling has slowed, it will take time before foreign funds resume buying Indian stocks. The investment bank noted that various approaches using flows, positioning and ownership trends suggest foreign flows are now close to downside scenarios, indicating that the bulk of foreign selling may be over following the recent months of record outflows. However, experts note that several reasons are driving this selling, including a weak rupee, concerns over slower earnings growth, rising geopolitical tensions and higher crude oil prices. As per The Economic Times, the hot EM trade among global trading desks is Long Korea/Taiwan, Short India, with India lacking the cushion of a semiconductor boom that offsets oil import costs.
Despite the overall selling trend, foreign investors have shown selective interest in certain sectors and investment opportunities. According to market analysts, foreign investors have invested ₹12,340 crore in India's primary market this year, demonstrating continued interest in quality opportunities. Dr VK Vijayakumar from Geojit Investments Limited noted that global investors are shifting focus to markets like South Korea and Taiwan due to impressive earnings growth linked to the artificial intelligence boom. Foreign investors are also selectively buying mid-cap and small-cap stocks that offer strong growth potential and are delivering good financial results, showing that while investors remain cautious, they are still seeking quality opportunities in India. According to The Economic Times, investors may be better off looking at pockets with lower foreign ownership, with bluechips where overseas investors are most active still performing while mid- and small-caps continue to outperform despite expensive valuations.
