New Delhi (Economy India): India’s equity markets came under renewed pressure in the first week of December as foreign portfolio investors (FPIs) withdrew a massive ₹11,820 crore, marking one of the sharpest weekly outflows of recent months. According to depository data, the exodus was triggered primarily by the steep depreciation of the Indian rupee, which has weakened investor sentiment and reduced the relative attractiveness of Indian assets.
This sharp sell-off comes soon after FPIs pulled out ₹3,765 crore in November, indicating a sustained trend of foreign capital retreating from Indian markets.
📉 Rupee Depreciation Becomes Key Trigger for Outflows
The Indian rupee has been under pressure due to:
- Persistent strength in the US dollar
- Global risk-off sentiment
- Concerns over widening trade deficits
- Rising crude oil prices and geopolitical uncertainties
For foreign investors, a falling rupee means lower returns in dollar terms, making Indian equities less appealing despite strong domestic fundamentals.
Market analysts believe that as long as the rupee remains volatile, FPIs may continue to adopt a cautious stance.
📊 Heavy Selling Weighs on Market Sentiment
The sizeable outflow has:
- Increased selling pressure in frontline indices
- Contributed to intraday volatility and weak market breadth
- Led to profit booking in large-cap stocks, especially in banking, IT, and capital goods
While domestic institutional investors (DIIs) continued to support the market through consistent buying, it wasn’t enough to fully neutralize the impact of aggressive foreign selling.
🌐 Global Factors Behind FPI Exit
Apart from rupee depreciation, a series of global developments have influenced FPI behaviour:
Federal Reserve Policy Uncertainty
Investors await clearer signals on the Fed’s interest rate stance. Higher US yields reduce the incentive to invest in emerging markets like India.
Weak Global Growth Outlook
Concerns about recession risks in Europe and softening industrial output in China have increased risk aversion.
Capital Rotation to Safer Assets
With geopolitical tensions persisting, including Middle East instability, investors prefer safe-haven assets such as gold and US Treasuries.
🇮🇳 India’s Structural Strengths Remain Intact
Despite temporary outflows, India remains one of the strongest emerging markets:
- Robust GDP growth forecasts
- Strong corporate earnings
- Large domestic investor base
- Expanding manufacturing activity
- Stable banking and credit environment
Economists believe that FPIs may return in larger volumes once global uncertainties ease and the rupee stabilizes.
📝 Expert Outlook: What Lies Ahead?
Market strategists suggest the following trends for December and early 2026:
- Short-term volatility may persist if the rupee sees further weakness.
- FPI inflows may revive if global central banks turn dovish early next year.
- Sectors like manufacturing, PSU banks, capital goods, and energy may attract renewed foreign interest.
- Domestic investors will remain the backbone, offsetting global negativity.
The withdrawal of ₹11,820 crore by foreign investors in the first week of December highlights the sensitivity of capital flows to currency fluctuations. While global headwinds have contributed to the recent exodus, India’s long-term economic outlook continues to remain favourable.
Market watchers expect FPIs to recalibrate their positions once fiscal visibility improves and global financial conditions stabilize.
(Economy India)
