Foreign Investors Are Pulling Out, While FDI Remains Low

What is surprising is that hardly anyone is talking about this. A current account deficit of 0.5% of GDP, combined with a continuously weakening rupee and heavy foreign capital outflows, is an issue that deserves far greater attention.

India’s stock market continues to show resilience, but beneath the surface, an important concern is emerging. Foreign portfolio investors are steadily pulling money out of Indian equities. Since January 2025, FPI withdrawals from Indian equities have reportedly reached nearly $42 billion. Such a substantial outflow reflects changing global investor preferences and is becoming an important factor influencing Indian markets.

The concern is not limited to portfolio investment. Net FDI inflows of around $6.1 billion so far this financial year remain relatively low, raising questions about the pace of long-term foreign investment into the country. Unlike FPI, FDI represents a more stable and long-term commitment to the Indian economy.

The current account deficit, at around 0.5% of GDP, remains manageable at present. However, the continued weakening of the rupee is a concern. A weaker rupee makes imports more expensive and can add further pressure to the country’s external position.

The RBI has taken steps to strengthen foreign-currency liquidity through swap measures, while NRI mobilisation of around $12.7 billion provides some comfort. These are positive developments, but they cannot completely offset the significance of sustained foreign capital outflows.