FIIs Withdraw Rs.2 lakh Crore from Six Major Sectors in 2025; New Year may See a Balanced Approach

Foreign institutional investors (FIIs) have withdrawn nearly 2 lakh crore rupees from six important sectors of the Indian stock market in 2025, signalling concerns over the weakening appeal of Indian equities among global investors. Information technology has been the most affected, with an outflow of Rs 79,155 crore.

The Fast-Moving Consumer Goods (FMCG) sector saw a withdrawal of Rs 32,361 crore, the power sector witnessed FIIs pulling out Rs 25,887 crore, and healthcare companies saw Rs 24,324 crore outflow. Consumer durables and consumer services also suffered, with a withdrawal of Rs 21,567 crore and Rs 19,914 crore, respectively.

According to data from the National Securities Depository Limited (NSDL), FIIs have withdrawn Rupees 1.6 lakh crore from Indian stocks in 2025, marking one of the sharpest reversals in recent years.

According to ICICI Securities, much of the money withdrawn from the Indian market have been redirected to global peers such as China, Japan, Europe, and the United States, as these markets delivered stronger returns, ranging from 12 per cent to as high as 61 per cent, while Indian markets offered only modest gains.

The selling trend has not been limited to just the top six sectors. Other areas like real estate, financial services, and automobile companies have also been affected. The real estate sector saw Rs 12,364 crore in outflows, financial services lost Rs 10,894 crore, and the automobile sector faced a pullout of Rs 9,242 crore.

A few industries have managed to attract foreign investments. The telecom sector led the way with inflows of 47,109 crore rupees. Oil and gas companies received 9,076 crore rupees, and the services sector brought in 8,112 crore rupees.

Reasons Behind FII Withdrawal

One of the reasons for the reduced foreign interest in Indian stocks is the booming activity in the initial public offering (IPO) market. In 2025, FIIs invested 7.1 billion US dollars in IPOs. This amount is about 40 per cent of what they sold in the secondary market. This shift in focus has taken a toll on existing listed companies.

2026 Outlook

Despite the heavy selling, some experts believe the situation may improve given the positive momentum seen this month with FIIs recording a net inflow of Rs 21789 so far. Ross Maxwell, Global Strategy Operations Lead, VT Markets, said that the rupee's recovery almost definitely played a meaningful role in attracting foreign institutional investors (FIIs) back into Indian equities last week. The recovery reduces the risk of losses for USD-based investors and provides improving macro confidence, especially after such an extended period of depreciation.

Easing global bond yields also helped, as US yields fell back from recent highs, meaning the demand for emerging market equities improved. Valuations in select Indian sectors had corrected meaningfully after months of selling, creating opportunities for FIIs who had been underweight in India. Domestically, strong GDP momentum, healthy credit growth, and sustained government capital expenditure continue to help distinguish India from many other emerging markets in a positive light.

Looking ahead to next year, Maxwell believes that FII flows are likely to be more balanced rather than one-directional. If global rates begin to ease and the USD weakens, India could see more sustained inflows, supported by its structural growth story. However, volatility will remain, and flows may remain selective, favouring high-quality companies with earnings visibility rather than buying more broadly.

DIIs Continue Support

Meanwhile, domestic mutual funds have continued to receive strong support from Indian investors. Systematic Investment Plans, or SIPs, brought in 3.2 lakh crore rupees in 2025. However, most of this money has gone into large, well-established companies and new IPOs, leaving smaller and mid-sized companies more exposed to price drops.