Foreign institutional investors (FIIs) have offloaded a staggering ₹90,993 crore in Indian equities so far in 2025, according to market data. The selling spree continues, with ₹9,090 crore net sold in February alone, despite ₹1,478 crore invested through primary market issuances.
The outflows are largely attributed to the strength of the US dollar index and elevated bond yields, which have made emerging markets like India less attractive. “The strength in the dollar index and the high US bond yields continue to force the FIIs to sell. Going forward, FIIs are likely to reduce their selling since the dollar index and US bond yields are indicating a softening trend,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Finfluencer Vineet Bhatia questioned the sustainability of FII interest in India, stating that foreign investors only profit from Indian indices if their holding period exceeds 15 years. He further pointed out that S&P returns in USD terms have far outpaced other markets, raising doubts about FIIs returning to Indian equities anytime soon. “Kyu ayengey FIIs wapas?” he asked.
Bhatia shared a post showing Compound Annual Growth Rate (CAGR) in USD terms for various countries' stock markets over time horizons ranging from 1 to 20 years, as of January 31, 2025. India's BSE 500 demonstrates steady growth across all periods, with notable CAGRs of 13.9% over 5 years and 11.2% over 20 years. In comparison, the USA's S&P 500 has consistently outperformed, delivering robust returns across all timeframes, including a remarkable 26.3% for 1 year and 14.4% over 15 years.
Other markets reveal diverse trends. Taiwan impresses with long-term growth, boasting a 19.6% CAGR over 5 years and 14.9% over 10 years. China shows significant short-term gains, achieving a 35.2% 1-year CAGR, though with marked volatility. Meanwhile, emerging markets such as Indonesia, the Philippines, and Brazil report negative CAGRs in shorter horizons (1 to 5 years) but exhibit resilience in longer-term returns. Overall, the data underscores the USA's dominance, India’s steady progress, and the challenges faced by certain emerging markets.
Domestically, however, market sentiment is improving, buoyed by a pro-growth Union Budget, a rate cut by the RBI, and the BJP's recent electoral victory in Delhi. Analysts remain optimistic about India’s long-term potential.
Manoj Purohit, Partner & Leader, FS Tax at BDO India, highlighted reforms such as tax simplifications, extended tax holidays in IFSC Gift City, and the invitation of 100% FDI in insurance. “With sound and pathbreaking reforms... the government has clearly laid the roadmap for the ‘Viksit Bharat’ vision on track,” he said.