Stock Market Crash: Foreign Investors’ Holdings Hit Decade-Low Levels
The Indian Stock Market continues to witness a significant downturn, primarily due to heavy sell-offs by Foreign Portfolio Investors (FPIs). In January 2025 alone, FPIs offloaded stocks worth over ₹78,000 crore, intensifying their selling spree after a brief period of stability in December 2024. According to National Securities Depository Limited (NSDL) data, this trend has persisted into February 2025, with net outflows reaching ₹7,342 crore by February 10.
Decline in Foreign Institutional Investors (FII) Holdings
Foreign Institutional Investors (FIIs) were net sellers in 22 out of 23 trading sessions in January 2025, exerting immense pressure on the market. Since October 2024, FIIs have sold stocks worth ₹1.7 lakh crore across various sectors. Their share in the Indian equity market has steadily declined:
- January 2015: 20.2%
- January 2024: 16.3%
- January 2025: 16.0% (Lowest in a decade)
In December 2024, FII holdings stood at 16.1%, indicating a marginal decline in January. Notably, in October 2024, FII participation had hit a 12-year low. Additionally, the total Equity Assets Under Custody (AUC) for FIIs plunged from ₹71.1 lakh crore in December 2024 to ₹67.7 lakh crore in January 2025, marking a 5% drop due to sustained foreign selling.
Which Sectors Faced the Highest Sell-Off?
Foreign investors aggressively sold stocks in major sectors, particularly Banking, IT, Oil & Gas, and Automobiles. Here’s a breakdown of the highest outflows:
- Banking & Financial Services (BFSI): $2.8 billion (Approx. ₹23,000 crore)
- Information Technology (IT): $747 million (Approx. ₹6,100 crore)
- Oil & Gas: $182 million (Approx. ₹1,500 crore)
- Automobile: $672 million (Approx. ₹5,500 crore)
In December 2024, Banking and IT stocks saw some recovery, but January 2025 marked a complete reversal as foreign investors aggressively liquidated holdings.
Sectors Witnessing Minor Investments
Amid the massive sell-offs, a few sectors saw modest foreign inflows:
- Chemicals: $41 million (Approx. ₹335 crore)
- Media: $20 million (Approx. ₹165 crore)
- Telecom: $16 million (Approx. ₹130 crore)
Why Are Foreign Investors Selling?
Several factors have contributed to this large-scale FII exodus from the Indian market:
- Rising U.S. Bond Yields: Higher returns in developed markets are attracting capital away from emerging economies.
- Global Recession Fears: Uncertain macroeconomic conditions and sluggish global growth are prompting cautious investment strategies.
- Geopolitical Tensions: Escalating geopolitical risks have made investors more risk-averse.
- Rupee Depreciation: A weakening rupee makes Indian assets less attractive to foreign investors.
What Should Investors Do?
Given the current market volatility, long-term investors should stay cautious and diversify portfolios across different asset classes. Market corrections often present buying opportunities, but it’s crucial to conduct thorough research and consider expert financial advice before making investment decisions.
Disclaimer: Investing in the stock market involves risks. Always seek guidance from a certified financial expert before making investment decisions. This article does not constitute financial advice.