FPI exits from Indian markets hit all-time high on tariff and earnings fears

Foreign portfolio investors (FPIs) have pulled $17.3 billion from Indian equities so far in 2025, making it the largest annual outflow on record, as concerns over US tariffs and slowing earnings weigh on sentiment.The selling, which began in October last year, has only seen brief pauses between March and June. For perspective, the previous record was set in 2022 with $17 billion of outflows, while 2010 still holds the record for the highest yearly inflow at $29.3 billion.

Year	FPI flows into equity ($ bn)
2020	23.37
2021	3.76
2022	-17.02
2023	21.43
2024	-0.75
2025*	-17.26

*Till September 2025; Source: Bloomberg
What began as profit-taking on stretched valuations has escalated after US President Donald Trump imposed a 50% tariff on Indian goods—the steepest in Asia—along with sharply higher H-1B visa fees.With a US-India trade deal still uncertain and valuations elevated, analysts see little chance of foreign money returning in the near term.

Selling persisted on Tuesday, September 30, with a net outflow of $262 million, provisional exchange data showed.The extended selling has also pressured the rupee, which hit a record low of 88.80 per dollar on Tuesday, making it the weakest-performing Asian currency this year with a 3.6% decline.

Global comparisons underline the premium at which India trades. The Nifty50 is valued at 20x one-year forward earnings, compared with 14.8x for China’s CSI 300, 10.8x for Korea’s Kospi, and 17.2x for Taiwan’s Taiex, Bloomberg data show.

“India’s macro signals remain uneven, while elevated valuations keep equities less attractive in the near term,” said Marc Franklin, Deputy Head of Multi Asset Solutions, Asia at Manulife Investments. He added that while domestic flows stay strong, foreign sentiment remains weak amid policy and growth concerns.

Meanwhile, flows into other emerging markets stand in stark contrast. China has attracted $27.4 billion in inflows this year through June, taking its 12-month tally to $55 billion. Taiwan is a distant second with $7.2 billion in inflows so far.

Even so, Indian equities have held up thanks to local support. The Nifty50 is up 4.1% year-to-date and remains on course for its 10th consecutive annual gain, powered by record inflows from domestic investors. Mutual funds and insurers have poured in $66 billion in 2025, already surpassing last year’s $63 billion.