Selling by foreign investors
The year 2025 has become one of the weakest years for foreign investors in the history of the Indian stock market. During this entire year, foreign portfolio investors i.e. FPI withdrew about Rs 1.6 lakh crore from Indian stocks. This is the largest annual outflow so far. Earlier in 2022, about Rs 1.21 lakh crore was withdrawn, but the figure for 2025 was much more than that. Experts believe that there were many global and domestic reasons behind this, due to which the confidence of foreign investors was shaken.
US bond yields continued to remain at high levels in 2025. Due to higher interest rates in America, risk-free returns appeared better there. The result was that a large amount of global capital moved from emerging markets to developed countries. Besides, the dollar also remained strong, due to which the returns in dollar terms on investing in countries like India were seen decreasing. Fluctuations in the rupee and rising costs of hedging also increased the concern of foreign investors.
Trade tension and geopolitics increased uncertainty
Global trade tension also remained in discussion during 2025. Especially the fear of possible tariffs from America and disruption in the global supply chain made investors cautious. Fluctuations in energy prices and geopolitical tensions also weakened risk appetite. In this situation, foreign investors preferred safer markets and reduced their stake in emerging markets like India.
Where has the market gone on the domestic front?
Even within India, there were some factors which forced foreign investors to book profits. Share prices in many sectors had reached very high levels. In such a situation, foreign investors considered strategic profit booking as a better option. However, market experts also believe that this is not a question on India’s long-term growth story, but a temporary adjustment.
Selling pressure remained throughout the year
If we talk about month-wise figures, then in 2025, foreign investors sold shares in 8 out of 12 months. About Rs 78 thousand crores were sold in January alone. By March this figure crossed Rs 1.16 lakh crore. There was some relief between April and June and purchases worth about Rs 38,600 crore were made, but this recovery could not last long.
Domestic investors took charge
However, despite the rapid selling by foreign investors, the Indian stock market did not collapse completely. The biggest reason for this was strong buying by domestic institutional investors. The continuous inflow of money from retail investors through mutual funds and SIP provided great support to the market.
Foreign trust shown in loans, not shares
The interesting thing was that foreign investors kept withdrawing money from the stock market. At the same time, he invested about Rs 59 thousand crores in the Indian debt market. India’s inclusion in the global bond index and high interest rates continued to attract foreign investors. Experts believe that in view of the possibility of interest rate cuts in the coming time, foreign investors are investing money in Indian government bonds for the long term.
Although 2025 was disappointing, market experts express optimism about 2026. If interest rates in America fall, dollar weakens and India’s economic growth remains strong, then return of foreign investors is possible. Besides, trade agreement between India and America and budget reforms at domestic level can also improve the investment mood.
Also read- India changed the tax system in 2025, new income tax law will be implemented from April 1