Foreign Investment in Indian Stocks Faces a Slowdown as Global Tensions Persist

Foreign portfolio investors (FPIs) have invested nearly $3 billion in Indian equities since March, attracted by the country's stability amidst global trade tensions and expectations of a corporate earnings rebound. However, this positive momentum seems to be fading.

FPI Turned to Selling

After 16 straight sessions of net buying, FPIs turned net sellers on Friday, May 9, unloading $279 million worth of Indian stocks, followed by an additional $56 million in outflows on Tuesday.

Further caution is fuelled by the recent rally in Indian equities, which had seen the largest one-day gain in over four years, losing momentum on Tuesday. The benchmark Nifty50 fell by 1.4% to 24,578.35, and the Nifty IT index dropped 2.4%, reflecting renewed pressure on technology stocks. Market participants suggest that IT stocks may have limited upside at current levels, with one-year forward valuations now near their five-year average, having surpassed levels seen in April when the U.S. imposed new tariffs.

While FPIs purchased $1.3 billion worth of Indian shares in April, their investment has been selective, with financial stocks favoured and IT stocks avoided due to concerns about a potential U.S. growth slowdown.

Nevertheless, India remains a standout among emerging markets in terms of foreign inflows, with a net inflow of $2.7 billion quarter-to-date. In comparison, South Korea has seen sharp outflows of $6.7 billion since April, while Taiwan has attracted $4.4 billion in inflows, primarily driven by its semiconductor sector, which remains exempt from recent U.S. tariffs.

Also Read: Best Mutual Fund Sip Plan for May 2025 

Conclusion

While foreign portfolio investments (FPI) in Indian equities have been robust in recent months, fuelled by the country’s relative stability and earnings optimism, signs of a slowdown are becoming evident. The shift from net buying to net selling and the decline in short-term inflows reflect growing caution among investors.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in securities market are subject to market risks, read all the related documents carefully before investing.