FIIs dump Rs 1 lakh crore of shares in 33 days; Know why they’re exiting and when they will return

The relentless sell-off by foreign institutional investors (FIIs) has become a major concern for the Indian equity markets. Consider this: since October 2024, global investors have dumped nearly Rs 2 lakh crore worth of shares. During the same period, the benchmark BSE Sensex declined by 10%. On the other hand, the broader indices such as the BSE Midcap and BSE Smallcap retreated 19% and 21%, respectively. In 2025, FIIs have sold nearly Rs 1 lakh crore of shares in 33 sessions till February 14. 

FIIs flows in February were negative for all key emerging markets (barring Thailand). According to Kotak Securities, India, Brazil, Indonesia, Malaysia, The Philippines, South Korea, Taiwan, and Vietnam, witnessed outflows of $2,189 million, $21 million, $381 million, $59 million, $5 million, $276 million, $1,114 million, and $235 million, respectively. However, Thailand witnessed inflows of $17 million. 

Why FIIs are on a selling spree? Vipul Bhowar, Senior Director-Listed Investments, Waterfield Advisors explained that the recent shifts in global policies, especially those emerging from the US, are invoking a sense of uncertainty among FIIs, which in turn is reshaping their investment strategies in dynamic markets like India. 

“The allure of US assets has intensified, driven by rising bond yields that have made these investments seem more secure. This has led many FIIs to pivot away from Indian and other emerging market stocks. Investors are increasingly drawn to the promise of safer returns offered by US equities, leaving many markets, including India, in their shadow,” Bhowar said. 

Compounding this trend is a noticeable slowdown in corporate sales growth within India, further fuelling the exodus of capital from Indian equities. This deceleration casts a long shadow over the enthusiasm for stocks, prompting a wave of sustained selling. The combined gross sales of Nifty50 companies increased by 6.6% year-on-year for the quarter ended December 2024. The growth stood at 9.2% in the corresponding quarter a year ago. 

How is the future FPI flow expected to be? Shrikant Chouhan, Head Equity Research, Kotak Securities said, “Markets continue to focus on the downside risks, emanating from tariffs imposed by the US on India, uncertain domestic growth, and tepid management commentary from the Q3FY25 earnings season.” Consider the current market and economic conditions, Chouhan feels that FPI flows are expected to remain volatile. 

On the other hand, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services added that the reversal of FII strategy will happen when the dollar index moves down. “This will happen, but we can’t predict when,” he said.