FPIs Continue To Withdraw From Equities, But Selling Pressure Eases. See What Lies Ahead

FPIs offloaded equity shares worth Rs 1,794 crore ($194 million) during the week ending March 21, as compared to the $604 million outflows recorded in the previous holiday-shortened week.

Despite the recent uptick in FPI activity, analysts caution that investors remain watchful.

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The selling pressure in the Indian equity market eased a bit last week, resulting in a moderation in outflows from foreign portfolio investors (FPIs). As global concerns relaxed and the possibility of an improvement in the Russia-Ukraine conflict increased, the sentiment uplifted in the market.

As such, the outflows from FPIs narrowed to Rs 1,794 crore last week, reported PTI. However, despite this moderation, the streak of withdrawals extended to 15 consecutive weeks.

Market Sentiment Improves Amid Changing FPI Strategy

According to data from depositories, FPIs offloaded equity shares worth Rs 1,794 crore ($194 million) during the week ending March 21. This marked a significant improvement compared to the $604 million outflows recorded in the previous holiday-shortened week.

Notably, FPIs turned net buyers on two occasions, purchasing Rs 3,181 crore worth of equities on March 21 and Rs 710 crore on March 19. The renewed buying activity contributed to an overall positive market sentiment, leading to a rally in the markets for the week ending March 21.

V K Vijayakumar, Chief Investment Strategist, Geojit Investment Services, attributed this shift to improving domestic fundamentals, including a pickup in economic growth and easing inflation. Additionally, weakness in the US dollar played a role in changing FPIs' investment strategies.

US Fed Policy and Global Trends Remain Key Factors

Despite the recent uptick in FPI activity, analysts caution that investors remain watchful. Himanshu Srivastava, Associate Director of Manager Research at Morningstar Investment, noted that FPIs are closely monitoring the US Federal Reserve's interest rate trajectory, geopolitical factors, and India's economic outlook before making any significant investment decisions.

“Investor sentiment has shown signs of improvement, buoyed by easing global concerns and growing optimism around a potential de-escalation in the Russia-Ukraine conflict,” Srivastava said. He further added that the recent correction in the market created attractive entry opportunities for investors.

Additionally, a softer US dollar index and rising expectations of a Federal Reserve rate cut supported foreign fund inflows into emerging markets like India. Dovish signals from the Fed, hinting at two possible rate cuts this year, encouraged FPIs to selectively re-enter Indian equities, the analyst explained.

However, despite this renewed interest, FPIs have still pulled out Rs 31,719 crore from Indian equities so far in March. This follows outflows of Rs 34,574 crore in February and Rs 78,027 crore in January, bringing the total FPI withdrawals in 2025 to Rs 1.44 lakh crore, according to depository data.

On the debt front, FPIs showed continued interest, investing Rs 10,955 crore in Indian debt markets through March 21. Vijayakumar highlighted that this shift suggests FPIs are favouring debt instruments over equities amid ongoing market volatility.