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Foreign Investors Flee Indian Markets Amid Trade Tensions
9 Aug
Summary
- FPIs record ₹1,334 crore net outflows in 4th consecutive week
- Equity markets bear brunt of foreign selling, debt sees inflows
- US-India trade tensions cited as primary catalyst for foreign retreat
In the week ending August 8, 2025, foreign portfolio investors (FPIs) maintained their selling streak in Indian markets for the fourth consecutive week, recording net outflows of ₹1,334 crore. This represented a marginal improvement from the previous week's ₹2,000 crore outflow, but the markets still witnessed significant volatility in FPI flows.
The week saw the largest single-day outflow of ₹5,165 crore on August 8, marking one of the heaviest selling sessions. Equity markets bore the brunt of foreign selling, with net outflows of ₹11,370 crore for the week, while debt investments provided some cushion with net inflows of ₹2,036 crore.
Escalating US-India trade tensions emerged as the primary catalyst for the foreign investor retreat. The announcement of a 25% tariff hike on Indian goods by the US government heightened investor concerns, leading to a decline in market sentiment. Additionally, disappointing first-quarter corporate earnings and a weakening Indian rupee further exacerbated the selling pressure, as foreign investors reassessed their positions.
Looking ahead, market participants expect continued volatility, with risks from US trade tensions and sustained FII outflows remaining a key concern. However, potential support from domestic institutional investors (DIIs) could offer some relief to the markets.
