Apart from domestic factors like earnings and depreciation of the rupee, the enthusiasm of global investors over AI has pushed them to markets like Japan and Taiwan.
| Photo Credit: HEMANSHI KAMANI
Foreign Institutional Investors (FII) sold Indian equities worth ₹1.6 lakh crore in calendar year 2025, the most in about two decades, according to data from National Securities Depository Ltd. (NSDL).
As of December 2025, FIIs sold ₹22,611 crore worth equities. They have been net sellers in eight of 12 months. The year started with the strongest selling as a continuation of the correction in September 2024, recording a net sale of more than ₹74,000 crore in January. By March, foreign capital of about ₹1.16 lakh crore had exited the Indian stock markets. In February 2025, the benchmark NSE Nifty 50 returns dipped nearly 6%, making it the worst month of the year.
While markets did pick up after that in terms of monthly returns and negative returns moderated, foreign investor interest continued to stay weak barring a few weeks. This might probably be due to the big ticket IPOs like LG in the period post July 2025. However, the decline of over ₹1 lakh crore in the initial three months did not reverse in the rest of the year.
To be sure, FII’s investment in Indian equity mutual funds increased, coming in at a net inflow of ₹2,245 crore. This was significantly better than 2024, when foreign capital withdrew Rs.618 crore from Indian equity mutual funds. This may signify a slightly risk averse tendency of foreign capital when it comes to the Indian market.
According to experts, the high price-to earning ratio with respect to their quarterly earnings is one of the main reason behind the exodus in capital. Currently, a stock is priced 22 times the earnings per share in india, making it one of the most expensive markets in the world. The decline was exacerbated by a depreciating rupee, which made dollar returns on capital market investments much lower than what they expected. Indian markets have given close to no returns in dollar terms.
Exiting FIIs have also further sped up depreciation of the rupee bringing the exchange rate to ₹91 a dollar by the end of teh year.
Apart from domestic factors like earnings and depreciation of the rupee, the enthusiasm of global investors over AI has pushed them to markets like Japan and Taiwan.
The sustainability of the AI driven rally, the potential profitability improvement among Indian corporates are factors that will decide the quantum and speed of the return of foreign investor interest in India.
Published – December 31, 2025 07:30 pm IST
