The Government addressed concerns in Parliament over the substantial withdrawal of funds by Foreign Portfolio Investors (FPIs) from Indian equity markets in 2025, asserting that the trend reflects broader regional patterns rather than a loss of confidence specific to India.
Responding to an unstarred question in the Lok Sabha, the Ministry of Finance confirmed that FPIs have withdrawn over ₹12,569 crore in November alone and more than ₹1.5 lakh crore from equities so far in 2025. However, the Government emphasized that these outflows must be viewed in context, as they coincide with similar patterns across major Asian emerging markets.
Debt Market Shows Strength Despite Equity Outflows
In contrast to the heavy selling in equities, FPIs recorded strong inflows into the debt segment, amounting to ₹74,515 crore in 2025. Additional inflows of ₹3,009 crore were reported in hybrid instruments, mutual funds and Alternative Investment Funds (AIFs), signalling a shift in investor preference rather than an exodus of foreign capital overall.
According to the Government, FPI flows “remain dynamic” and are driven by global factors such as:
- Geopolitical tensions
- Trade tariff uncertainties
- Currency movements
- Portfolio rebalancing across emerging markets
The Ministry highlighted that nations like Vietnam, Malaysia, South Korea, Taiwan and Thailand have also witnessed substantial FPI selling this year.
‘AI Underperformer’ Label Rejected by Government
MPs also questioned whether India’s perceived underperformance in Artificial Intelligence has contributed to weakening investor sentiment.
The Finance Ministry dismissed such concerns, noting that:
- India ranks among the top global performers in AI skills and capabilities
- It is the second-largest contributor to AI projects on GitHub
- The IndiaAI Mission, built on seven strategic pillars, is strengthening infrastructure, research, future skills development, startups, and safe AI deployment
The Government argued that these initiatives showcase India’s readiness to leverage AI-driven economic opportunities.
Mid-Cap Earnings Strong, but FPIs Still Exit
Despite better-than-expected earnings in mid-cap companies, the Ministry acknowledged that FPIs continue to trim equity exposure.
Officials attributed this to global fund rebalancing across emerging markets, rather than domestic policy shortcomings. They also noted that Indian markets remain fundamentally strong, as indicated by benchmark indices staying close to their record highs, even amidst the FPI pullout.
Government Maintains That Investor Confidence Remains Intact
Reiterating that the recent FPI behaviour is not India-specific, the Ministry underscored that:
- Domestic investor participation has offset foreign selling
- Strong macroeconomic fundamentals continue to support market resilience
- Policy frameworks for AI, innovation, and capital markets remain robust
While equity outflows present a challenge, the Finance Ministry maintained that foreign investor confidence in India’s long-term prospects remains firm, supported by steady performance in debt markets and sustained domestic economic momentum.
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