FPI Selloff: There was a time when foreign portfolio investors (FPIs) sneezed — and Indian investors’ portfolios caught a cold. But over the last few years, this trend hasn’t held ground. The latest FPI selloff in July is one such example.
According to NSDL data, FPIs have become sellers in the Indian stock market this month, offloading stocks worth ₹5,826 crore so far. This selling, which followed three months of heavy buying, has failed to dent the benchmarks Sensex and Nifty like it used to, as indices have lost just over 1% this month.
FPIs sold heavily in IT, FMCG, consumer durables, autos, and healthcare, while rotating into services, metals, oil & gas, capital goods, and financials. They also remained active in IPOs, attracted by better valuations and long-term growth potential.
Meanwhile, so far in 2025, even as FPIs offloaded stocks worth ₹83,727 crore, Sensex has added 5% to its value, highlighting the reduced clout of the “Big Boys” of Dalal Street and a power shift that’s underway.
Experts believe the robust domestic institutional and retail participation is increasingly cushioning the impact of foreign selling. “The modest decline in benchmark indices despite significant FPI outflows reflects the growing resilience of domestic markets. Moreover, sectoral rotation within FPI activity suggests a shift rather than a complete exit, with inflows continuing in select cyclical and primary market opportunities,” said Anil Rego-Founder and Fund Manager at Right Horizons PMS.
Indian Stock Market’s Retail Boom
The growth in demat accounts, which was tremendous during the pandemic (+35.4% in FY21 and 63.4% in FY22) as retail participants flocked to the equity markets in the face of adversity, has persisted post the pandemic also, rising 27.8% in FY23, +31.9% in FY24 and +26.7% in FY25, according to data shared by JM Financial.
The demographic shift is clearly visible as retail participants with <30-years age group has risen from 22.6% of total in FY19 to 39.5% in FY25, while the share of the 60+ population has meaningfully fallen from 13.1% in FY19 to 7.1% in FY25. One obvious reason for the same is the rise of mobile-first broking platforms and increased SIP penetration in India.
Not just direct equity, but retail investors have also participated via mutual funds. Total mutual fund folios rose from 42 million in FY15 to 235 million in FY25 at a 19% CAGR, driven primarily by retail segments. “SIPs have emerged as a stable retail inflow mechanism, with annual SIP contributions rising from ₹43,900 crore in FY17 to ₹2,89,400 crore in FY25. India’s mutual fund AUM has expanded from ₹17.5 lakh crore in FY17 to ₹65.7 lakh crore in FY25, registering a CAGR of 18%, outpacing the Nifty 50’s CAGR of 12.5% over the same period,” said JM Financial.
Analysts also pointed out that, unlike before, retail investors are staying put during cycles of market downturn, lending support during such periods. “SIPs are touching record highs, whereas demat accounts have also crossed 15 crore accounts in 2025. Retail participation has increased in direct equity, ETFs and IPO applications as well. Also, SIP flows tend to be sticky in market downturns as well,” said Vaqarjaved Khan, CFA – Sr. Fundamental Analyst, Angel One.
Deepening capital markets, growing SIP flows, and increased retail trading also reflect a shift from physical to financial assets.
Rego said improved financial literacy, digital access, and favourable demographics are accelerating this trend. Retail investors now play a stabilising, long-term role in markets, reducing reliance on foreign capital and their consistent participation has enhanced market resilience, while contributing to India’s growing prominence in the global equity landscape, Rego added.
Will FPI selloff continue?
While FPI selling Indian stocks has failed to dent the stock market in any meaningful way, it has stalled the upward trajectory of the Indian stock market.
Analysts believe FPI flows are likely to remain selective and event-driven in the near term, influenced by global macro volatility, US rate trajectory, and trade dynamics. However, India’s relative macroeconomic strength, policy continuity, and earnings visibility provide a strong long-term case for renewed allocations, said Rego.
“While short-term caution may persist due to elevated valuations in some segments, FPIs are expected to favour sectors aligned with capex, manufacturing, and domestic consumption themes. As global uncertainties stabilise, incremental inflows could resume, especially if supported by moderation in global yields and clearer risk appetite,” he added.
Khan believes that while FPIs may move out of India on account of a tactical exit but structurally they are very bullish on India as it continues to remain one of the best placed economies globally and in terms of best GDP growth rate and retail inflation of less than 2.5%.
He added that once there is a clearer path of rate cut by the US Fed and global liquidity improves, then India is expected to become a top destination among EM economies on account of strong growth, governance and continued capex cycle.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
