FIIs Offload Over ₹2 Lakh Crore in 2025, DIIs Step In as Markets Lag Global Peers

Foreign institutional investors (FIIs) have pulled out more than ₹2 lakh crore from Indian secondary markets in 2025 so far, marking the sharpest annual outflow ever, with three months of the year still left. The selloff has already surpassed last year’s withdrawals of ₹1.21 lakh crore, signalling persistent scepticism despite repeated policy measures to revive sentiment.

Interestingly, while FIIs have remained net sellers in listed equities, they continue to participate actively in the primary market, investing over ₹44,000 crore in 2025 following a record infusion of ₹1.22 lakh crore in 2024.

Drivers of the Selloff

Multiple factors have fuelled this exodus:

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• Slowing corporate earnings
• Expensive valuations
• A weak rupee
• Geopolitical concerns

The Securities and Exchange Board of India’s (SEBI) 2024 directive classifying certain foreign portfolio investors (FPIs) as “high-risk” also added pressure. Funds with over 50% exposure to a single corporate group or holdings exceeding ₹25,000 crore were required to disclose their ultimate beneficiaries by September 2024 or face license cancellation. Many chose to trim positions, triggering volatility late last year and extending into 2025.

DIIs Provide a Cushion

Domestic institutional investors (DIIs) have acted as stabilisers, purchasing more than ₹5.3 lakh crore of equities this year after ₹5.27 lakh crore in 2024. Continuous inflows from pension funds, insurance companies, EPFO, and ELSS products have supported demand. However, analysts warn that DIIs cannot indefinitely offset sustained foreign outflows, especially with the rupee under pressure.

Despite government support measures such as tax cuts aka GST 2.0, monetary easing, and GST 2.0, global funds have remained cautious. Experts argue that only a correction in valuations and stronger earnings growth could attract FIIs back.

India Lags Global Markets

The impact of foreign withdrawals is evident in relative performance. In U.S. dollar terms, India’s Sensex has risen just 0.4% in 2025, while the Nifty is up 1%. In contrast, global benchmarks have surged: the S&P 500 gained 14%, the Dow Jones 9%, Germany’s DAX 37%, France’s CAC 40 22%, and the FTSE 100 24%. Asian indices too have posted strong gains, with Shanghai up 18%, Hang Seng 34%, Nikkei 20%, Kospi 57%, and Taiwan 22%.

Outlook and Expert Views

• Market watchers suggest that unless India strengthens its growth narrative, FII outflows may intensify. Sector allocation in the upcoming Q3 FY25 earnings season, as well as trade frictions and tariff developments, will be closely monitored.
• Analysts advise retail investors to remain patient, continuing with systematic investment plans (SIPs) and systematic transfer plans (STPs) to ride out volatility. Corrections may deepen if global or geopolitical risks escalate, but long-term investors should stick to disciplined investing, said an research analyst.
• Conversely, some experts recently pointed out that FPI selling might be approaching burnout. Supported by strong profits and economic fundamentals, Indian equities continue to enjoy a decent premium over their global counterparts, with equity flows at a -1 standard deviation as a percentage of market capitalisation.
• Any resolution of U.S. tariff disputes could further redirect flows into India, as the U.S. accounts for nearly 40% of FPI assets under custody. Sectors with strong FPI exposure—such as real estate, telecom, financial services, and healthcare—alongside under-owned segments like capital goods and power utilities, could benefit from a rebound.

Conclusion

In 2025, FIIs withdrew more than ₹2 lakh crore from Indian markets, which put them well behind their international counterparts. Even while retail flows and DIIs have offered resilience, momentum is still being held back by persistent international pessimism. According to experts, the main drivers of a shift in sentiment will be appealing values, a recovery in profitability, and a reduction in international headwinds.