FPI Flows Remain Muted in June 2025 Amid Rising Macro Risks

Foreign Portfolio Investors (FPIs) remained cautious in June 2025, as macroeconomic and geopolitical uncertainties cast a shadow over India’s investment landscape. While FPIs were net buyers of Indian equities for the third straight month, the momentum clearly weakened, reflecting growing investor concern about global risks, domestic data disappointments, and unclear trade policy direction.

FPI Equity Inflows Slowed in June; AUC Still Below Peak

If April 2025 saw net FPI equity inflows of $528 million and May brought in $2.32 billion, the June tally moderated to just $497 million. Despite a burst of aggressive buying in the latter half of the month, overall sentiment stayed subdued. On the debt side, FPIs were net sellers during June 2025.

At the end of June, the FPI Assets Under Custody (AUC) rose to $867 billion from $834 billion in May. However, this figure still falls short of the peak $931 billion recorded in September 2024. Even the cumulative FPI AUC across equity and debt at $909 billion is lower than the $1.01 trillion mark seen in the same period last year.

Sectoral Trends in FPI Activity

The following table summarizes the sectors that saw the highest net FPI buying and selling in June 2025:

Data Source: NSDL

Interpretation of Sectoral Movement

On the buying side, BFSI remained a dominant theme, driven by investor optimism around domestic lending growth and consumption-linked banking activity. Automobiles and telecom followed suit, reflecting confidence in India's domestic consumption story. The rise in chemical sector investments suggests FPIs are recognizing India’s growing role in global supply chains. The consumer services segment also saw marginal inflows, largely led by specific stocks like Eternal.

On the selling side, the themes were more valuation-driven and macro-sensitive. FPIs booked profits in the power and capital goods sectors, citing stretched valuations and concerns over slowing capex. FMCG and consumer durables saw outflows as worries over muted urban demand weighed on investor expectations.

Key Reasons Behind FPI Caution in June 2025

Several macroeconomic and geopolitical developments influenced the FPI flow trajectory:

• The Indo-US trade deal is yet to become a reality and as it stands, there are wide differences between India and the US on agriculture, services, and GM crops
• Another reason for the caution has been the weak IIP numbers, which came in at just 1.23% for May, compared to 2.57% in April 2025, due to capex constraints.
• FPIs were also cautious about the geopolitical situation in the Middle East, despite a rather tenuous peace deal between Iran and Israel for the time being.
• There are concerns that fiscal deficit could overshoot due to defence spending, and the 0.8% as of May could be misleading due to the front-loading of RBI dividends.
• As the Q1FY26 results season commences, there are concerns that weak urban demand and lack of private capex could hit the sales and profit growth overall.
• Finally, there are concerns over the value of the US dollar as indicated by the dollar index (DXY); and the passage of the OBBBA only makes it worse for the FPIs.

Conclusion: A Wary Outlook for FPIs Entering Q2 FY26

The moderation in FPI equity flows in June 2025 suggests that while India remains an attractive structural story, short-term caution is dominant. With several macroeconomic and geopolitical concerns still unresolved, foreign investors are likely to tread carefully in the upcoming quarters.

Key Takeaway: Despite continuing inflows, FPIs are adopting a “wait and watch” approach. Market participants should closely monitor global policy cues, domestic earnings, and fiscal announcements, which could influence the direction of future flows.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a registered advisor before making any investment decisions.