FPIs sold ₹18,000 crore worth Indian stocks in December, DIIs step in with double the buying

Foreign portfolio investors have resumed their selling streak in December, withdrawing nearly ₹18,000 crore worth of Indian stocks so far. However, the impact on the benchmark indices has remained limited, as the entire sell-off was fully absorbed by domestic institutional investors (DIIs), who in fact bought nearly twice the amount of stocks that FPIs sold during the same period.

According to NSDL data, FPIs have sold ₹17,955 crore in domestic equities in the first nine trading sessions of December. In the same period, DIIs, largely comprising mutual funds, have bought equities worth ₹36,101 crore, taking their total inflow for 2025 to a record ₹7.44 lakh crore.

Rupee slump drives fresh FPI selling

The renewed selling by FPIs, after a brief slowdown in November, was primarily due to the sharp depreciation in the Indian rupee, which in 2025 has lost 6% of its value against the US dollar, falling to 90.56.

This decline makes the local currency the worst performer among Asian currencies, as steep US tariffs of up to 50% on Indian goods hurt exports to its biggest market.

A weak rupee directly reduces the dollar value of FPI investments and increases perceived risk, prompting foreign investors to pull out capital in search of safer and more stable returns elsewhere.

India was among the first major markets to rebound after US President Donald Trump announced global tariffs in April, drawing investors who viewed the nation as a safe spot amid trade tensions. However, while other countries have reached agreements, India is still negotiating with the White House for a favourable deal.

FPIs on track for worst year of equity selling

NSDL data shows that FPIs withdrew a net amount of ₹1.61 lakh crore from Indian equities in the current calendar year so far, putting the year on track for the worst-ever sale of Indian equities.

Out of the last 11 months, FPIs remained net buyers in only three months, April, May, and October, NSDL data shows.

In contrast, DIIs began the year with aggressive buying of ₹86,591 crore in January, followed by ₹64,853 crore in the subsequent months. While inflows softened in March and April, they picked up pace again in May and June, with ₹67,642 crore and ₹72,673 crore, respectively, largely driven by a surge in block deals.

How is the future FPI flows expected to be?

Shrikant Chouhan, Head of Equity Research at Kotak Securities, said global equity markets have already priced in a 25-basis-point cut in the Federal Funds rate by the US Federal Reserve, projections of one rate cut in CY26, and continued optimism surrounding global AI.

He noted that in India, the RBI MPC unanimously reduced the policy repo rate by 25 bps to 5.25% while maintaining a ‘neutral’ stance. According to Chouhan, despite this, primary market activity continues to remain robust in India, though FPI flows are expected to remain volatile.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said it would be difficult for FIIs to sell continuously and maintain high short positions in a market supported by strong SIP inflows—especially when the economy is performing well and earnings growth prospects are improving.

He added that rupee depreciation, sustained FII selling, delays in finalising the US–India trade deal, and the ongoing global AI-driven rally are all temporary drags on the market.

The most important factor that will dictate the direction of the market is the earnings growth, and this looks promising for FY 27. Sustained selling in India when growth and earnings prospects are strong is not a sustainable strategy, he said, adding that this could eventually lend support to the market.

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