FPI outflows: Investors pull Rs 12,257 crore from equities in September first week; high valuations, weak earnings add pressure

Foreign Portfolio Investors (FPIs) pulled out RS 12,257 crore ($1.4 billion) from Indian equities in the first week of September, pressured by a stronger dollar, renewed US tariff concerns, and persistent geopolitical tensions.

This follows net outflows of Rs 34,990 crore in August and Rs 17,700 crore in July, taking the total equity withdrawals by FPIs to Rs 1.43 lakh crore so far in 2025, depository data showed.Market experts believe both global and domestic factors triggered the latest wave of withdrawals. “Multiple factors contributed to this risk-off sentiment, a stronger dollar, renewed US tariff threats, and continuing geopolitical tensions added to global uncertainty,” said Himanshu Srivastava, associate director – manager research, Morningstar Investment, as per news agency PTI.On the domestic side, analysts pointed to high valuations and slowing corporate earnings. “Indian equities continue to trade at a premium to other emerging markets, which prompted FPIs to book profits and reduce exposure,” Srivastava added.Vaqarjaved Khan, senior fundamental analyst at Angel One, noted that near-term volatility may persist but added, “India’s structural growth story, policy reforms, such as GST rationalisation, and expectations of an earnings revival could bring FPIs back once global uncertainties ease.”

VK Vijayakumar, chief investment strategist at Geojit Investments, highlighted that massive domestic institutional investor (DII) buying allowed FPIs to exit at high valuations and redirect funds to cheaper markets such as China, Hong Kong, and South Korea.In contrast, FPIs invested Rs 1,978 crore in the debt general limit while pulling out RS 993 crore from the voluntary retention route.Looking ahead, market sentiment will be shaped by global data and domestic macro indicators. Analysts cited by PTI said that the August inflation data due on September 12, along with key US economic releases, including consumer inflation and jobless claims, will play a crucial role in shaping flows. The upcoming US Federal Reserve policy meeting on September 16-17 and movements in crude oil prices and the rupee-dollar trend are also expected to be major drivers.“Indian equities are likely to enter the week on a cautiously optimistic note, with focus on consumption-driven and capex-linked sectors,” said Pravesh Gour, senior technical analyst at Swastika Investmart Ltd.