Foreign Investors Withdraw ₹44,396 Crore from Indian Equities in January
In January 2025, foreign investors pulled out ₹44,396 crore from Indian equities, marking a significant outflow from the market. This trend reflects growing concerns over domestic earnings and the impact of global economic indicators on emerging markets.
The substantial withdrawal is attributed to several factors, including expectations of fewer interest rate cuts by the U.S. Federal Reserve following strong employment data. This development has led to a rise in U.S. Treasury yields, making investments in emerging markets like India less attractive.
Additionally, the Indian rupee has experienced a decline, reaching an all-time low of 86.6475 against the U.S. dollar during the week. The currency’s depreciation is partly due to the continuous foreign portfolio outflows and heightened dollar demand in the non-deliverable forwards market.
Analysts suggest that the persistent strength of the U.S. dollar, coupled with concerns over India’s slowing economic growth and tepid capital inflows, has pressured the rupee. Foreign investors have net sold over $4 billion worth of Indian stocks and bonds so far in January, adding to the challenges faced by the currency.
The Reserve Bank of India (RBI) has been actively intervening to manage the rupee’s volatility, utilizing its foreign exchange reserves to mitigate sharp declines. Despite these efforts, the rupee logged its worst week in 18 months, with a 0.6% decline, marking its eleventh consecutive week of depreciation.
Market experts anticipate that the rupee may face further downward pressure in the near term, influenced by global economic factors and domestic market dynamics. The RBI is expected to continue its interventions to prevent excessive volatility and maintain market stability.
