According to data provided by the repositories, in September 2020, foreign portfolio investors (FPIs) withdrew Rs 7,945 crore of investments in Indian equities. The pullback was reflected in ongoing international insecurities, including trade tariffs and geopolitical tendencies. It is the third consecutive month of high sales, having sold Rs 34,990 crore and Rs 17,700 crore during the months of August and July, respectively.
These new withdrawals have increased total FPI net equity outflows to Rs 1.38 lakh crore in 2025. The selling scale reflects the prudent approach taken by foreign investors even amid India's relatively stable macroeconomic performance. Analysts have indicated that market sentiment is still being influenced by global monetary policy as well as domestic events.
Market analysts pointed out that the new US Federal Reserve resolution to reduce interest rates by 25 basis points was a temporary stimulus to foreign investors. In the week after the rate cut, FPIs bought 900 crore Indian equities. The Fed has also suggested that two more cuts can be made in 2025 that can help improve the global liquidity position.
Vaqarjaved Khan, Senior Fundamental Analyst at Angel One Ltd, observed that although this action brought some relief, the net flows in September were negative. Himanshu Srivastava, Principal of Manager Research at Morningstar Investment Research India, clarified that easing the trade frictions between the US and India favored minimal returns of foreign investors. Nevertheless, he emphasised that outstanding global risks still bring down the general sentiment.
As equity outflows continued, FPIs made more commitments to the Indian markets on debt products. In September, they invested in the general limit of Rs 900 crore and in the voluntary retention route of Rs 1,100 crore. Analysts see this as a change of direction because the foreign investors are adjusting the risk through the diversification into fixed-income instruments.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that FPI's selling activity in India has been accompanied by buying in Asian markets, like Hong Kong, Taiwan, and South Korea. According to him, this trend has been profitable to date, but he indicated that the strategy would change depending on global conditions in the coming months.