Foreign Investors Selling Indian Stocks Amid Profit Booking and Global Uncertainty: FM
Foreign investors have been selling Indian stocks heavily, could be because of the good returns their investments have generated letting them book profits. As per the Finance Minister Nirmala Sitharaman statement, “India remains an attractive destination for investments and will take steps to improve it’s environment for investors.”
“FIIs also exit when they are profitable. The Indian economy now has an environment in which investments are yielding strong returns and profits are being booked (by overseas investors),” during the post-Budget meeting with the media, Sitharaman stated.
The government is decreasing and adjusting taxes on imports to support investors. It is important as the global trade is uncertain, mainly with the US planning to increase tariffs. Also, India’s stock market has been unstable but experts believe this fall in prices gives investors a good chance to buy stocks at lower price.
India’s benchmark stock indices, Nifty 50 and Sensex, ended an eight-day losing streak recently. The reason behind this fall is continuous selling pressure, which, in turn, presented a buying opportunity for some investors.
From the beginning of the year until February 14, foreign portfolio investors (FPIs) have been net sellers of $12 billion in Indian equities, as per data from the National Securities Depository Ltd (NSDL). In comparison, in 2024, FPIs were net buyers of $124 million in domestic equities.
The investments are yielding good returns according to the experts, resulting in profit booking by foreign investors. The foreign investors tend to exit markets whenever they have the opportunity to secure their profits.
Even though the financial sources shows that foreign investors have been selling Indian stocks, still there is no evidence of a large scale exit. While FPIs have offloaded shares of $21 billion in four months up to the end of January, this represents just 14.2% of the $148 billion drop in their assets from a total of $930 billion as of the end of September. The rest of the decline is largely attributed to unrealized losses in their portfolios.
With on-going global uncertainty, such as planned tariff hikes by the US government, worries have been expressed that foreign investment will be relocated between emerging economies. Also, financial regulators explained that during global instability, foreign investors tend to return their investments to the US instead of transferring between growing markets.
The continuous selling of Indian stocks by FIIs is expected to continue due to the increasing US bond yields and global trade tensions. Even after all these challenges, India continues to be the fastest growing large economy and is expected to maintain it’s growth momentum.
Stock Market Performance and Global Comparison
There are many challenges faced by the Indian stock market not only because of dynamic global trade but also due to weal third quarter earnings from Indian companies. Since reaching an all-time high of 26,216.05 points on September 26, the Nifty 50 index has declined by 12.4%.
In addition, as of January 31, the MSCI India Index returned 5.88% over one year, much lower than the wider MSCI Emerging Markets Index’s 15.35% return.
Plans for Rationalizing Duties
The government has asserted that India’s customs duty rationalization strategy is a continuous process to build an investor-friendly ecosystem. The 2025-26 Budget has proposed to rationalize the basic customs duties along with reviewing safeguard and anti-dumping duties at periodic intervals.
Moreover, the US government has proposed reciprocal tariffs, means that tariffs on imported goods would match those charged by exporting countries. Despite these potential trade restrictions, India and the US have agreed to work toward increasing bilateral trade to $500 billion by 2030 while negotiating a trade deal to lower duties and improve market access.
Proposal to Increase Deposit Insurance Cover
In a related development, the government is considering in earnest raising the insurance coverage on bank deposits, currently set at Rs.5 lakh. This was the last time the cover was increased from Rs.1 lakh in 2021. The proposal is in serious consideration as part of attempts to tighten the financial safety net for depositors.
All commercial banks like foreign bank branches, small finance banks, payment banks etc. are covered under the deposit insurance scheme.
This plan became more important after the Reserve Bank of India (RBI) took control of Mumbai-based New India Cooperative Bank Ltd for one year due to management problems. Officials have said that the RBI is handling the situation and has taken the necessary steps.
Whereas foreign investors have been offloading Indian stocks, analysts attribute this mainly to profit-booking and not an exodus on a large scale. Uncertainties in global trade, the hike in US bond yields, and disappointing corporate earnings have bred volatility in the stock markets. Nevertheless, India is a great place to invest in, with continued policy initiatives to support economic growth as well as improving the financial system.
