FPI outflows: Foreign investors withdraw over Rs 23,800 in Sept; sell off triggered by US tariffs and H-1B visa fee hike

Foreign investors pulled Rs 23,885 crore out of Indian equities in September, pushing total outflows for the year so far to Rs 1.58 lakh crore, according to depository data.This marks the third straight month of net selling, following heavy withdrawals of Rs 34,990 crore in August and Rs 17,700 crore in July.Himanshu Srivastava, principal and manager research at Morningstar Investment Research India, attributed the recent selling to several factors, including US trade and policy shocks. The Trump administration’s sharp tariff increase of up to 50% on Indian goods, along with a one-time $100,000 H-1B visa fee, hit sentiment in export-oriented sectors, especially IT.

The rupee hitting record lows also added to currency risks, while high valuations in Indian equities prompted investors to rotate funds to other Asian markets, he told PTI.Despite the outflows, some analysts remained cautiously optimistic believing that conditions will eventually turn in India’s favour. Vaqarjaved Khan, senior fundamental analyst at Angel One, said valuations have become more reasonable. A cut in GST rates and a pro-growth monetary policy could rekindle foreign interest, Khan further added. “India remains the fastest-growing major economy globally,” Khan added, emphasising that upcoming earnings and macroeconomic data will influence FPI flows in the near term.Srivastava highlighted that a sustained recovery of foreign investment will depend on tariff clarity, currency stabilisation, earnings visibility, and a supportive global rate environment. If these factors improve, India’s strong growth story could draw selective investor interest.In debt markets, FPIs invested Rs 1,085 crore under the general limit and Rs 1,213 crore through the voluntary retention route in September.VK Vijayakumar, chief investment strategist at Geojit Investments, told PTI that moving funds out of India has so far offered better returns, as Indian equities underperformed most global markets over the past year, with one-year returns in negative territory.