FPI outflows at five-month high

Foreign institutional investors net sold ₹35,962 crore worth of Indian equities in January, the highest since August.

This selling is based on data from National Securities and Depository Ltd.

The trend of foreign selling has continued from the previous year.

In calendar year 2025, FIIs sold ₹1,66,286 crore in Indian equities.

While FIIs sold equities directly, they were net buyers through the mutual fund route.

Over the last four months, FIIs net bought ₹312 crore via mutual funds.

Equity selling coinciding with mutual fund buying reflects a sense of caution on India rather than a complete exit.

There is a meaningful flow into global emerging market funds.

India has benefited from these broader emerging market flows, improving headline flow numbers.

Despite this, selling by India-focused funds continues.

Slower earnings growth reduces return expectations for foreign investors.

Marginal earnings beats are insufficient to offset broader concerns on profitability.

Uncertainty about future earnings keeps foreign portfolio investors cautious.

Depreciation erodes returns for foreign investors when converted into home currency.

Raises concerns over currency risk even when equity valuations appear attractive.

Encourages investors to reduce exposure or delay fresh inflows.

Meaningful flows into global emerging market funds lead to selective allocation.

India-focused funds continue to see withdrawals despite broader emerging market inflows.

Investors shift funds towards markets offering better risk-adjusted returns.

Volatile global financial conditions increase preference for safer assets.

Equity market volatility leads to short-term profit booking by FPIs.

FPIs adopt a tactical rather than long-term allocation approach.

Large-scale selling exerts downward pressure on stock prices.

Increases intraday and short-term market fluctuations.

Affects investor sentiment, especially in large-cap stocks.

Outflows reduce foreign exchange inflows.

Adds depreciation pressure on the rupee.

May necessitate intervention by the Reserve Bank of India to manage volatility.

Reduced participation of FPIs lowers market liquidity.

Can widen bid-ask spreads and reduce depth in equity markets.

Domestic institutional investors often absorb part of the selling pressure.

Persistent outflows signal caution about growth prospects.

Can dampen confidence of global investors and corporates.

May delay capital raising plans through equity markets.

Sustained volatility in flows complicates monetary and exchange rate management.

Reinforces the need for strong macroeconomic fundamentals and earnings growth.

Highlights the importance of stable currency and predictable policy environment.

National Securities Depository Limited is an Indian central securities depository.

Headquarters: Mumbai, Maharashtra.

Established in 1996.

It was the first electronic securities depository in India with national coverage.

Operates under the jurisdiction of the Ministry of Finance, Government of India.

Listed on BSE in August 2025.

The enactment of the Depositories Act, December 1995 paved the way for the establishment of NSDL.

Created to enable dematerialisation and electronic settlement of securities.

Provides depository services to:

• Investors

• Stock brokers

• Custodians

• Issuer companies

Key services include:

• Dematerialisation of securities

• Transfer of securities

• Settlement of securities

Operates through a network of Depository Participants and digital platforms.

NSDL holds assets worth about ₹398 lakh crore in demat accounts as of end-2023.

It contributes to the majority of settlements in Indian securities markets.

Accounts for more than 89 percent of the total value of assets held in demat form in India.

Has over 2.80 crore demat accounts.

Major shareholders include:

• IDBI Bank

• National Stock Exchange

• HDFC Bank

• SUUTI

Ownership reflects a mix of banking and market infrastructure institutions.

NSDL IPO launched in July 2025.

Structure: Offer for sale by existing shareholders.

Issue size: ₹4,012 crore.

Shares listed on BSE on 6 August 2025.

NSDL Group includes:

• National Securities Depository Limited

• NSDL Database Management Limited

• NSDL Payments Bank Limited

NDML and NSDL Payments Bank are subsidiaries of NSDL.

Enables paperless securities holding, reducing fraud and settlement risks.

Improves efficiency, transparency, and speed of capital market transactions.

Plays a critical role in tracking foreign portfolio investment flows, including FPI inflows and outflows.

Acts as a backbone institution for India’s market infrastructure.