FPIs withdraw Rs 22,194 cr in Jan amid weak earnings outlook, rising dollar

Foreign investors have withdrawn Rs 22,194 crore from Indian equities this month, driven by expectations of a weak earnings season, a steady rise in the US dollar, and concerns over tariff war during Donald Trump's presidency.

This came following an investment of Rs 15,446 crore in the month of December, data with the depositories showed.

Foreign investors have scaled back their investments in Indian equities significantly amid global and domestic headwinds.

"This exodus of foreign money from the Indian markets could be attributed to multitude of factors, such as expectation of yet another weak earning season, concerns over the tariff war under Trump's presidency, slowdown in GDP growth, still high inflation numbers and uncertainty over the commencement of the interest cut in India," Himanshu Srivastava, Associate Director, Manager Research, Morningstar Investment Research India, said.

Additionally, record low level of Indian rupee, surge in US bond yields coupled with rich valuation of Indian markets also makes Indian equities relatively unattractive for foreign investors.

According to the data, Foreign Portfolio Investors (FPIs) offloaded shares worth Rs 22,194 crore from Indian equities so far this month (till January 10).

FPIs have been sellers on all trading days except January 2.

"The single major reason for the relentless selling by the FPIs is the steady rise in the dollar index which is above 109 now. The surge in the 10-year bond yield to above 4.6 per cent is ensuring capital flows from emerging markets like India," V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said.

The overall trend indicates a cautious approach by foreign investors, who scaled back investments in Indian equities significantly in 2024, with net inflows of just Rs 427 crore.

This contrasts sharply with the massive Rs 1.71 lakh crore net inflows in 2023, driven by optimism over India's strong economic fundamentals.