FPIs Pull ₹10,000 Crore from Indian Stocks in One Day - Here's Why

In a dramatic market shake-up, foreign portfolio investors (FPIs) pulled out a whopping ₹10,016 crore from Indian stocks on Tuesday. That’s one of the most significant one-day exits we’ve seen. The impact? The Sensex crashed by 873 points, and the Nifty 50 slipped below 24,700, down over 1%.

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A Confluence of Global and Domestic Factors

A mix of global and local forces triggered this sudden selloff. Here’s what’s driving it:

1. Rising U.S. Bond Yields and a Stronger Dollar

The yield on 10-year U.S. Treasury bonds is now above 4.5%, which attracts investors looking for safer returns. With U.S. assets looking more attractive and the dollar gaining strength, many FPIs are shifting their money out of emerging markets like India.

2. China’s Stock Market Is Booming

Chinese stocks are having a moment. The Hang Seng Index jumped 26% in just one month, thanks to significant stimulus efforts from Beijing. Compared to India, which is now seen as overvalued, China suddenly looks like a bargain, and investors are chasing those gains.

3. Indian Stocks Look Pricey, But Earnings Are Weak

Indian equity valuations are high, and that’s worrying investors, especially since recent corporate earnings haven’t lived up to the hype. Significant sectors like financials and IT, where FPIs are heavily invested, haven’t delivered strong results.

4. Global Tensions = Higher Risk Aversion

Tensions in the Middle East, particularly between Israel and Iran, are rattling markets. Uncertainty around U.S. trade policies under President Trump adds to the mix. When things feel this shaky, investors often run toward safer bets.

5. Rupee Weakness Adds to the Worry

Despite a weaker U.S. dollar, the Indian rupee has remained unchanged at 85.61. Continued dollar outflows and corporate payments have weighed it down. A softer rupee makes Indian investments less appealing for foreign investors.

Expert Commentary

“This is part of a broader global portfolio reshuffle,” said Mahesh Nandurkar, Head of Research at Jefferies India. “It’s not about India’s fundamentals being weak, it’s about investors chasing relative value elsewhere.”

Dr. Rekha Menon, economist at Axis Capital, added: “Valuations in India are high, and U.S. bond yields are becoming competitive. Unless earnings improve soon, we might see more foreign outflows.”

Policy Responses and Government Stand

So far, there have been no official statements from the Finance Ministry or the RBI. But behind the scenes, discussions are happening, especially around rupee stability and keeping capital flows steady.

Sources say the RBI might step in more aggressively to stabilize the rupee. There’s even chatter about easing capital gains tax rules for FPIs to win back investor confidence. Meanwhile, the Finance Ministry is planning talks with global funds to reassure them about India’s growth prospects going into the future.

Despite Tuesday’s blow, Indian markets bounced back the next day. The Sensex shot up over 800 points, and the Nifty climbed to 24,894.15, up 0.82%. Every primary sector saw gains, primarily financial and pharma stocks.

This rebound was powered by domestic institutional investors stepping up and positive signals from global markets. Still, many analysts remain cautious because the core issues behind the selloff haven’t disappeared.

Market Reaction and Recovery

This selloff highlights just how sensitive India’s markets are to global winds. While domestic investors remain confident, foreign investors are closely watching valuation levels, earnings reports, and international trends.

In the coming weeks, all eyes will be on:

• India’s upcoming economic data
• Corporate earnings
• RBI’s take on interest rates
• U.S. bond movements
• Trade policy shifts globally
   

As Rajiv Mehta from YES Securities puts it: “India’s long-term growth story is still solid. But to keep FPIs onboard, we need clear policies, open communication, and ongoing reforms.”

Looking Ahead

Yes, ₹10,000 crore walking out the door in one day is a big deal, but it doesn’t mean the sky is falling. India’s economy is still stable. With the right policy moves and a bit of global calm, this could be a short-term shakeup, not a lasting trend.