Out of the last five, foreign investors have been pure selling in three financial years while institutions in the country became big buyers. Foreign portfolio investors sold shares worth Rs 1.31 lakh crore in FY 25 which is the highest figure after FY 2022. During this time, the indigenous institutional investor was a pure buyer of Rs 6.07 lakh crore, which is the highest figure of any financial year. Domestic institutes have been a net buyers in four of the last five financial years.
Foreign investors have been selling pure out of 7 of the last 12 months. Most of the FPIs took place in the second half of the financial year. Initially this selling was due to the re -allocation of capital in China, which was the attractive evaluation and government incentive measures there. The weak results of companies in July-September and October-December quarters made the rapidly increased evaluation baseless after epidemic.
The withdrawal of foreign capital increased due to Donald Trump’s victory in the US presidential election. Concerns of possible changes in the US trade policy also led to an increase in the US bond yield and strengthened the dollar, leading foreign portfolio investors to pull out of emerging markets such as India. The implementation of the trade fee after Trump’s assuming power increased the discomfort of investors and their trends towards safe investments such as gold from risky assets increased.
However, investment of domestic institutions has increased in the last few years. The net procurement in FY 25 has been about three times more than their net procurement in FY 24. Domestic institutional investment mainly includes the purchase of mutual funds, which was Rs 4.7 lakh crore in FY 25 while it was Rs 2 lakh crore in the last financial year. Many retail investors invested in equity through mutual funds due to post -epidemics. The number of SIP accounts of SIP accounts increased from 3.7 crore to 10.1 crore by February 2025 in March 2021.
The founder of Equinomics G. Chokkalingam said, “Two years of continuous boom in the market gave FPI a chance to profit booking.” FPI selling has had a major impact on market capitalization. After the Leemon crisis, domestic institutions made more purchases than FPI selling. And since then the domestic institutes finally turned out to be right and they have got the benefit of the market. When the market improved, they benefited greatly. And this time the same is likely to happen.
Later, the stability of the market will decide the direction of investment. Although FPI selling decreased in March, it is concerned that it may increase further as the results of January-March quarter companies may remain soft and remain uncertain on trade charges.
Independent equity analyst Ambareesh Baliga said, “We need to consolidate the markets and stabilize the rupee for the purchase of FPI.” As long as SIP investment is purely positive, domestic institutions cannot sit with cash. But if the markets again sell, then there will be a decline. If the value of your net property is decreasing then the investment will also decrease.
First Published – March 31, 2025 | 11:09 pm IST