FPI Outflows Hit $1.96 Billion in Early December 2025 - What Changed?

Foreign Portfolio Investors (FPIs) have started December 2025 on a cautious note. In the first half of the month alone, FPIs sold Indian equities worth $1.96 billion. That is unusual.

Typically, December is not a heavy selling month for FPIs in emerging markets. Large exits tend to distort annual performance numbers. But these are not normal times - and the data shows it.

The first fortnight of December has been clearly dominated by FPI selling. The reasons go beyond short-term profit booking.

Why December 2025 Is Different

FPIs usually avoid aggressive selling in December. Liquidity is thinner, global desks slow down, and investors prefer to lock in gains without rocking portfolios.

This time, several factors have combined to break that pattern.

India is dealing with external pressures from US tariffs, geopolitical complications around oil trade, and rising concerns over relative valuations. At the same time, FPIs are reassessing India-specific macro risks.

As a result, FPI equity assets under custody (AUC) have fallen to $814.25 billion, while total AUC stands at $893.89 billion - both well below the peaks seen in September 2024.

What Triggered the FPI Sell-Off?

The selling in December was not driven by a single event. It was the outcome of multiple overlapping concerns.

First, the prolonged delay in finalising the Indo-US trade deal has unsettled foreign investors. Trade data already suggests that US tariffs are hurting Indian exports in sensitive sectors.

Second, FPIs have growing India-specific concerns. These include:

• slowing nominal GDP growth,
• pressure on the fiscal deficit,
• rising government debt, and
• a perception that the reform momentum has slowed.

But the single biggest trigger was the sharp fall in the Indian rupee. The rupee briefly crossed ₹91 per dollar, and the market perceived RBI intervention to be limited.

For FPIs, currency risk can wipe out equity gains very quickly. Once the rupee started sliding, risk appetite fell sharply.

Sectoral FPI Flows: First Fortnight of December 2025

Despite heavy overall selling, FPIs were selective. The sectoral data from NSDL highlights how foreign investors repositioned their portfolios.

Data Source: NSDL

Reading the Sectoral Signals

Oil & Gas saw positive flows of $331 million. This was largely driven by buying in Reliance Industries and interest in oil marketing companies, supported by lower crude prices.

Metals & Mining also attracted inflows. FPIs are betting on a potential recovery in Chinese growth, which could support global metal prices.

Autos and Consumer Durables continued to see some buying, reflecting confidence in domestic demand. However, the pace of inflows has slowed, indicating that enthusiasm is fading.

The sharpest selling was seen in BFSI. While banking and financial services remain a domestic growth story, their large weight in indices makes them a preferred exit route when FPIs reduce overall exposure.

IT and Healthcare remained under pressure. FPIs are avoiding sectors with high dependence on US revenues due to policy uncertainty and tariff risks.

Notably, heavy selling in Power, Capital Goods, Cement, Realty, and Telecom points to rising concerns about a slowing capex cycle.

What This Pattern Tells Us

For FPIs, the current phase is no longer about choosing between domestic and global growth stories.

The priority has shifted to:

• protecting capital,
• managing currency risk, and
• defending gains in a volatile environment.

A falling rupee changes the risk equation across all sectors. Even strong domestic themes lose appeal when currency losses threaten overall returns.

Why This Matters for Indian Markets

FPI selling does not automatically signal panic. Often, it reflects disciplined risk management.

However, sustained outflows can increase near-term volatility and affect sector leadership. Domestic investors will need to track whether selling continues into the second half of December.

If currency stability improves and global clarity emerges, FPI flows could stabilise. Until then, caution is likely to dominate.

Key Takeaways

• FPIs sold $1.96 billion of Indian equities in the first half of December 2025.
• December selling is unusual and reflects broader global and domestic concerns.
• Rupee weakness beyond ₹91/$ was the biggest sentiment shock.
• BFSI, IT, and Services saw the heaviest selling.
• Oil & Gas and Metals attracted selective FPI buying.

Disclaimer: This article is for informational and educational purposes only and does not constitute investment advice.