FPIs Pull ₹12,257 Cr in Early September Amid Strong Dollar, U.S. Tariff Worries

Rapid Summary

• Foreign investors pulled out ₹12,257 crore ($1.4 billion) from Indian equities during the first week of September 2025, following outflows of ₹34,990 crore in August and ₹17,700 crore in july.
• Total Foreign Portfolio Investors (FPIs) equity outflow has reached ₹1.43 lakh crore so far in 2025.
• Key factors for withdrawal include a stronger dollar, renewed U.S. tariff concerns, geopolitical tensions, slowing corporate earnings momentum, high valuation of Indian equities compared to othre emerging markets, and risk-off sentiment globally.
• Domestic factors such as GST rate rationalization and healthy Q1 GDP growth data of 7.8% have partially cushioned market sentiment.
• FPIs invested ₹1,978 crore in debt general limits but withdrew ₹993 crore through the voluntary retention route during this period.
• Analysts anticipate near-term volatility but are optimistic about India’s structural growth story possibly attracting FPIs back once global uncertainties ease.

Indian Opinion Analysis

The steady FPI pullout highlights India’s vulnerability to global economic dynamics like currency strength shifts (dollar thankfulness), geopolitical instability, and new tariff threats from major economies like the U.S., impacting investor confidence across emerging markets including India.

Domestically high valuations-where Indian equities trade at a notable premium to peers-combined with slowing corporate earnings progression seem to be fundamental issues driving profit-booking among FPIs. Despite these challenges signaling short-term financial stresses on equity markets-a residue of heavy foreign selloffs-the government-backed initiatives such as GST rationalization and notable quarterly GDP figures (7.8%) offer potential stabilizers for future investment inflows.

Structural reforms remain key to mitigating capital flight risks while concurrently improving India’s attractiveness against cheaper alternatives (China/Hong Kong). Additionally sustained participation from Domestic Institutional Investors provides resilience by absorbing intense selling pressure from international counterparts – an indication that local market fundamentals still retain robust support mechanisms despite external headwinds.

For more details: The Hindu

Images included:
!Representative image