Foreign Investors Pull ₹23,885 Crore From Indian Equities in September

Foreign portfolio investors (FPIs) continued their equity sell-off in India, withdrawing ₹23,885 crore ($2.7 billion) in September. This brings the year-to-date outflow to ₹1.58 trillion ($17.6 billion), marking the third consecutive month of net selling following ₹34,990 crore in August and ₹17,700 crore in July, according to depository data.

Experts attribute the outflows to multiple factors, including recent US trade and policy shocks—such as tariff hikes of up to 50% on Indian goods and a one-time $100,000 H-1B visa fee—which negatively impacted export-oriented sectors, particularly IT. The rupee’s decline to record lows added currency risk, while relatively high equity valuations prompted investors to rotate funds to other Asian markets, said Himanshu Srivastava, Principal Manager Research, Morningstar India.

Despite the ongoing sell-off, some analysts see potential for a gradual recovery. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, noted that valuations have become more reasonable, and factors like a cut in GST rates and a pro-growth monetary policy could rekindle foreign interest. He added that India’s status as the fastest-growing major economy globally and the upcoming earnings season will be crucial in shaping FPI flows.

Srivastava added that a sustained turnaround will depend on tariff clarity, currency stabilization, earnings visibility, and a supportive global rate environment. If these conditions improve, India’s structural growth story could selectively attract foreign investors back.

In contrast to equities, debt markets saw net inflows, with FPIs investing about ₹1,085 crore under the general limit and ₹1,213 crore through the voluntary retention route in September. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, observed that FPIs’ strategy of shifting funds abroad has yielded better returns, as Indian equities underperformed most global markets over the past year, posting negative one-year returns.