FPI Selloff Worth ₹5,826 Cr Fails to Shake Indian Markets as Retail Strengthens Grip

Foreign portfolio investors (FPIs) have offloaded stocks worth ₹5,826 crore in July 2025 so far. Yet, their selling spree has barely made a dent in India’s benchmark indices, which are down just over 1% this month. This marks a clear shift from earlier market trends when foreign outflows often triggered sharp corrections.

The latest FPI activity comes after three consecutive months of net buying. Sectors like IT, FMCG, consumer durables, autos, and healthcare saw heavy selling, while FPIs redirected capital towards services, capital goods, metals, oil & gas, and financials. They also remained active in IPOs, lured by improved valuations and India’s long-term growth outlook.

Despite total net outflows of over ₹83,700 crore in 2025 to date, the Sensex has gained 5%—a signal of changing market dynamics. Experts believe this resilience is due to the growing influence of domestic investors, especially retail participants and mutual funds, who are increasingly acting as a cushion against global volatility.

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Retail Participation Drives Market Resilience

The surge in demat accounts, mutual fund SIPs, and digital investing has contributed to a structural transformation. As per industry data, demat accounts have grown steadily post-pandemic—rising by 27.8% in FY23, 31.9% in FY24, and 26.7% in FY25. More notably, investors under the age of 30 now make up nearly 40% of the total base, up from 22.6% in FY19. This generational shift is largely driven by mobile-first broking platforms and improved digital access.

Meanwhile, mutual fund participation has seen explosive growth. SIP contributions jumped from ₹43,900 crore in FY17 to ₹2.89 lakh crore in FY25. Total mutual fund folios surged from 4.2 crore in FY15 to 23.5 crore in FY25—reflecting a 19% CAGR. The industry’s AUM has grown from ₹17.5 lakh crore to ₹65.7 lakh crore in the same period.

Retail investors are also displaying greater maturity. Rather than pulling out during corrections, many are holding their positions or adding to them, making SIP flows relatively sticky even in downturns. ETF and IPO participation have risen, too, signalling broader financial market engagement.

FPI Outflows: Tactical or Structural?

Although recent selling has paused the market’s upward momentum, analysts believe the move is tactical. In the near term, FPI flows may stay selective and influenced by global macro factors like U.S. interest rates and trade outlooks. However, India’s robust macroeconomic fundamentals, policy continuity, and corporate earnings visibility continue to attract foreign interest over the long term.

Experts suggest that once global bond yields stabilise and risk appetite returns, India is likely to be among the top destinations for global capital—particularly in sectors linked to manufacturing, infrastructure, and consumption.

Conclusion

India’s capital markets are showing increased independence from FPI flows, thanks to the deepening participation of domestic investors. As younger investors and SIP contributors become long-term stakeholders, market volatility is less dictated by foreign selloffs. This evolving investor base is not only making India’s markets more stable but is also reshaping the power dynamics on Dalal Street