India faces record -outflow of FPI in the face

Copyright © HT Digital Streams Limit all rights reserved. Foreign investors get record money from the Indian market amid the tariff cloud Ram Sahgal 3 min Read 03 Oct 2025, 06:00 AM IT Foreign portfolios or FPIs sold cash shares worth £ 2,02 billion in the calendar year. (Pixabay) Summary Indian markets have a record of the outflow of foreign investors of £ 2,02 trillion, powered by high valuations and a falling rupee. Without a bilateral trade agreement with the US, analysts warn that market profits may remain limited as other countries produce better returns. Mumbai: Foreign investors have shifted record amounts of money from the sale of Indian stocks in the secondary or cash market to other countries that perform better, as the Indian market maintains high valuations and the rupee continues to decline in the midst of tariff tensions. Foreign portfolio investors or FPIs sold cash shares worth £ 2.02 trillion in the calendar year to October 1, according to National Securities Deposit Ltd (NSDL). In the same period in 2022, the outflow of the FPI cash was at £ 1.46 trillion, the second highest in a year based on the latest data, and £ 1.21 trillion last year. Analysts believe the heavy outflow can keep market profits in check until India and the US subscribe to a bilateral trade transaction (BTA), which has been in the works for several months. On Wednesday’s closure of 24,836.3, India’s benchmark Nifty 50 traded 5.5% on September 27 last year under its record high of 26,277.35, despite heavy buying by domestic institutional investors (DIIs), especially mutual funds. DIIs have bought net shares worth £ 5.82 trillion so far this year, BSE data. India underperforming the FPI extract is the fall of the Indian Rupee, which fell 3.5% YTD to 88.69 to the US dollar after being an average of 81.63 in the previous three years, according to Bloomberg data. In addition, the valuations of India remain exalted, more amid downward revisions to earnings growth. This has forced FPIs to redistribute funds to countries with cheaper valuations, causing markets to perform India in dollars much better. “World markets are changing form,” said Shankar Sharma, founder of Gquant Investch. “Spain, Korea, South Africa, Mexico, Pakistan and Brazil lead the maps this year, strengthened by the demand for commodities, cyclical products and cheaper valuations.” Data provided by Sharma showed that the Nifty 50 ranks 24 under 29 major World Equity indices in the year to September 30, producing a small return of 0.3% in dollar conditions. By contrast, the criterion Ibex 35 of Spain gave a return of 51.3%, making it the top-performing global market in dollar terms. South Korea’s Kosspi, which produced 50.6%in dollar terms, was second, followed by South Africa’s FTSE/ JSE Africa Top40 IX (46.5%), and Mexico’s S&P/ BVM IPC (44.7%). Even Pakistan’s KSE-100 index yielded a return of 42.5% in dollars in the same period. The main trend – return spreads beyond the ordinary US and India. Indeed, the US S&P sits on the 21st rank with a relatively modest return of 13.7%, Sharma added. Valuations high The attraction of overseas markets is reinforced by India’s increased valuations relative to other countries. The Nifty 50 trades against a one-year forward-to-earnings multiple of 19.35 times, against Ibex 35’s 12.95x, Kospi’s 10.34x and KSE 100’s 7.85x, which makes the markets more attractive to foreign investors. NSE data shows that the total FY26 profit growth estimates of the top 200 well-covered businesses by market cap has been cut by 0.5%since the end of June, with the projected growth in earnings from September 5 at 11.6%. Policy measures aim to counteract rates to reduce the impact of the tariff increase, a number of fiscal and financial measures have been taken by the Government and the Reserve Bank of India (RBI). The center rationalized GST pages to 5% and 18% of four plates earlier, with a new 40% plate set for sin -goods such as tobacco. The RBI enabled banks to finance acquisitions by businesses and maintained a dovish policy on interest rates. “These measures, especially at GST, can lead to an increase in corporate earnings growth from the third quarter, which could force FPIs to reconsider their awards strategy to India, as valuation concerns about Abate,” says Ambaardesh Baliga, independent market analyst. “But the right kicker will come as India and the US ink a tariff agreement, which will lead to a turnaround from the FPI flow and drives the market to break and maintain to the new bull market area.” Agree with Sriram Velayudhan, senior vice president at IIFL Capital Services. “Until a BTA (bilateral trade agreement) has been reached, we would not be able to maintain at higher levels. In the absence of a trade agreement, we will not remain a distance, although the markets are probably not falling from a cliff thanks to domestic liquidity,” Velayudhan said. 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