FPIs pull out nearly $1 billion in 4 trading days of Aug

Foreign portfolio investors (FPIs) have continued their aggressive exit from Indian equities, pulling out $915 million (₹8,005 crore) in just the first four trading sessions of August. The sharp selloff comes close on the heels of over $2 billion outflow in July, taking the total foreign withdrawal from Indian markets this year to $11.84 billion (₹1.03 lakh crore).

The sheer pace of selling in August shows a sign of growing unease among global investors about emerging market risk, high valuations, and macro uncertainties.

The year began with heavy outflows — January alone saw FPIs pulling out over $9 billion. February and March continued the trend, though at a slower pace. That was followed by a three-month respite: from April to June, foreign investors returned as net buyers, pumping in over $4.5 billion.

But the tide turned sharply in July, with a renewed selloff that erased much of the recovery. Though the selling spree is being cushioned by domestic fund flows— with equity MF inflows bouncing back (24% rise) in June to ₹23,587 crore— the market is finding it tough to scale new highs given that the Nifty over the past year has been flat.

The August selloff works out to a daily average of ₹2,001 crore — the second-worst daily outflow in 2025 after January's brutal ₹3,392 crore per day. With cumulative net FPI outflows in 2025, the pattern is clear: after a brief pause, foreign investors are once again exiting Indian equities at an aggressive pace.

January 2025 set the tone for FPI pessimism, with total outflows of ₹78,027 crore over 23 trading days, averaging ₹3,392 crore per session. August is now showing a similar severity — even though only four trading sessions have passed, the ₹2,001 crore daily outflow suggests another potentially damaging month for markets if the trend continues.

Several factors are being cited for the reversal in FPI sentiment. Rising US treasury yields are prompting a shift away from risk assets, while growing concerns over global trade tensions are fuelling volatility. Indian equity valuations — seen as relatively expensive — have also come under scrutiny, prompting profit-taking.

Some analysts also point to a possible rotation of capital toward markets such as China and other Asian markets, which are now trading at steeper valuation discounts. The Nifty 50 is currently trading at a PE multiple of 24.2x, making it Asia’s priciest market compared with Hong Kong’s Hang Seng at 12.2x, China’s CSI 300 at 16.9x, South Korea’s Kospi at 14.7x, besides Japan’s Nikkei and Taiwan’s Taiex at 19x.

Unless there is a meaningful improvement in global sentiment or a domestic trigger for renewed optimism, foreign capital could continue heading for the exits with Trump turning on the heat on India’s exports to the US.