MUMBAI: Foreign portfolio investors (PFIs), who have been jittery since last October, have pulled out a whopping Rs 34,993 crore from domestic equities in August. This marks the sharpest selloff in the past six months and nearly double of July’ Rs 17,741 crore selloff, weighed down by the US tariff tantrums disappointing first quarter earnings but still price valuations.
With this, foreign investors have pulled out a whopping Rs 1.3 trillion from equities so far in 2025, show the data with the depositories and the August pullout is the sharpest since February, when they had dumped equities worth Rs 35,574 crore.
Of the total month pullout, as much as Rs 20,976 crore were taken out in the first fortnight of the month, with significant outflows from the financial services and IT sectors, show the data from National Securities Depository (NSDL).The selling was driven by concerns over the US tariff uncertainty, a weaker rupee, and disappointing corporate earnings, though some sectors like telecom saw inflows, according to market watchers.
Financials and IT stocks were the worst hit with the highest FPI selling in the month. And this shows that though their holding is at a decadal low and lower than their domestic counterparts, they still drive stock prices.Analysts are divided over the reason for the FPI selloff, though with some blaming it on the higher valuation of Dalal Street compared to other emerging market peers and some blaming it on the punitive US tariffs which would dent export earnings.
For instance, VK Vijayakumar, the chief investment strategist at Geojit Investments, attributes the massive FPI selloff to the relatively high valuations of India compared to valuations in others, forcing them to move money to cheaper markets.
To substantiate this he points to the fact FPIs have been sustained buyers in the primary market for long and despite massive selling through exchanges, they have bought equity for Rs 40,305 through the primary market so far this year where valuations of IPOs are fair. More over, they have net buyers of debt as well, he adds pointing to the fact that they have invested Rs 6,766 crore in government debt and withdrew only Rs 872 crore during the period under review.
On the other hand, Himanshu Srivastava of Morningstar India says the spook was the US announcement of the steep 50% punitive tariffs on Indian goods which dented sentiment significantly, raising concerns over trade competitiveness and growth outlook, according. Coupled with this is the disappointing June quarter earnings by many key sectors that fell short of expectations and further dampening investor appetite, he added.