Foreign portfolio investors (FPIs) have maintained a cautious stance on Indian equities in 2025, with outflows dominating secondary market activity. So far in calendar year 2025 (CY25), they have pulled out Rs. 1.42 trillion, including Rs. 12,257 crore in just the first four trading days of September, according to NSDL data.
The exodus is largely driven by India’s premium valuations compared to other emerging markets, pushing FIIs to rotate capital toward cheaper destinations. Tariff uncertainties and exchange rate volatility have further shaped their strategy, keeping near-term flows unpredictable.
Despite trimming exposure in the secondary market, FIIs have still shown confidence in the primary market, infusing Rs. 40,305 crore into initial public offerings (IPOs), where valuations are perceived to be more reasonable.
A study by Nomura highlighted the trend of reduced allocations, noting that relative weightage to India by global emerging market (EM) funds dropped by one percentage point in July. At the end of July, 71 percent of EM funds were underweight India, with capital shifting toward China, Hong Kong, and South Korea. Nomura also reported that 41 out of 45 funds in its sample lowered exposure to India during this period, underlining the scale of the shift.
Scale of Selling in August
In August 2025, FIIs sold Indian equities worth Rs. 35,000 crore, marking the largest bout of selling since January this year. On a year-to-date basis, total net selling stood at Rs. 1.3 lakh crore, making it one of the sharpest withdrawal phases in recent years. The selling pressure was concentrated in sectors like financial services, IT, oil and gas, and power.
What Did They Sell?
Financial services witnessed major selling in August, with FIIs pulling out Rs. 23,288 crore. IT services also witnessed sustained selling at Rs. 11,285 crore, although this was lower than July’s sharper exit of Rs. 19,901 crore. Oil and gas stocks saw net sales of Rs. 6,108 crore, while the power sector recorded outflows of Rs. 4,075 crore. Sectoral breakdown further highlighted weakness in consumer-driven pockets, with FIIs exiting Rs. 1,969 crore from consumer durables and Rs. 1,417 crore from FMCG.
What Did They Buy?
Not all sectors were under pressure in August, with FIIs selectively allocating capital to a few pockets. Media and telecom emerged as the biggest beneficiary, attracting Rs. 5,931 crore. Materials followed with inflows of Rs. 3,348 crore, while capital goods drew Rs. 1,896 crore. The auto sector also saw buying interest of Rs. 1,803 crore, reflecting a shift in sentiment after prolonged selling earlier in the year.
Sectoral Stance and Trends
The sectoral stance of FIIs in August reveals sharp contrasts between long-term selling themes and near-term tactical buys. In autos, for instance, FIIs bought Rs. 1,803 crore during August, although CYTD flows remain negative at Rs. 12,819 crore. Consumer durables and FMCG continued to face pressure, with CYTD outflows of Rs. 16,479 crore and Rs. 17,717 crore, respectively.
IT services, which saw Rs. 8,934 crore in outflows in August alone, remain the largest sectoral loser of the year with CYTD sales of Rs. 48,684 crore. Conversely, media and telecom stood out as the clear winner, with FIIs buying Rs. 5,931 crore in August, taking CYTD inflows to Rs. 34,823 crore.
Outlook for Flows
While the selling streak has raised concerns, experts believe that the tide could turn in the coming quarters. G. Chokkalingam, founder and head of research at Equinomics Research, said several triggers are aligning for India to regain foreign inflows. He pointed to GST rate cuts, reductions in direct taxes announced in the Budget 2025, a favorable monsoon’s impact on inflation and interest rates, and improving corporate earnings as potential positives.
“The only concern is valuation (Nifty PE at 21x one-year forward) as compared to peers like China that will be on the minds of the FIIs. A rate cut by the US Fed in the months ahead, which is a strong possibility, will go a long way in bringing FII money to India,” Chokkalingam added.
Conclusion
August marked another heavy selling month for FIIs in Indian equities, led by exits from financials, IT, oil and gas, and power. However, selective buying in sectors like media and telecom, materials, capital goods, and autos suggests a nuanced stance rather than a blanket withdrawal. With macroeconomic and policy triggers likely to play out in the months ahead, the October quarter could prove pivotal in determining whether the outflow trend finally reverses.
Written By Manan Gangwar
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