FII investment in India has turned sharply negative in 2025. Since July, foreign portfolio investors have sold more than ₹1 lakh crore of Indian equities. Their share of India’s total market cap has dropped to ~17%, the lowest level in 15 years.
This shift has raised important questions about why FIIs are selling and why foreign investors are leaving India despite a steady domestic economic outlook.
Why FIIs Are Selling India
Foreign investors are leaving India because of global return gaps, currency pressure and sector preferences.
These factors are driving a broader FII withdrawal across many emerging markets.
It is important to note that India’s fundamentals remain strong despite this FII exit. Foreign investors are not exiting because India’s fundamentals have weakened.
1. Earnings growth is stronger in other markets
Indian companies continue to grow, but their earnings have not kept up with other major markets. Take Reliance and Nvidia, for example, Reliance’s stock rose 19.77% in a year while net income grew under 10%, whereas Nvidia delivered 27.32% returns with 59.18% net income growth. This contrast is driving investors toward markets with stronger earnings power.
2. Rupee depreciation reduces USD returns
The rupee has remained under pressure. Even when Indian stocks perform well, foreign investors often receive weaker dollar-adjusted returns, reducing India’s appeal during periods of currency volatility.
Read more: Why is the Indian Rupee Falling Against the US Dollar?
3. Higher U.S. yields pull capital away
With U.S. interest rates staying elevated through 2024–25, global funds found attractive, low-risk yield opportunities abroad. As a result, FII investment in India has slowed sharply, in line with trends across other emerging markets.
4. India’s growth themes remain domestic
India’s strongest drivers consumption, manufacturing and financial services are solid but largely local. Meanwhile, global funds are prioritising scalable themes such as AI, semiconductors and cloud technology, which India does not yet dominate.
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5. FIIs prefer IPOs over listed stocks
FIIs are selling secondary-market equities but actively buying into large IPOs, where pricing and allocation visibility are better. This was evident in recently listed companies like Groww and Lenskart, where FIIs took stakes just under 60% even though they were net sellers of about ₹8,700 crore in the same month.
US Markets Are Seeing a Completely Different Trend
While India faces heavy outflows, the U.S. is experiencing the opposite trend. Foreign ownership of U.S. equities has reached ~$18 trillion, or about 30% of the market, its highest level in 35 years. Global investors are rotating toward the U.S. at scale.
Key reasons behind this shift include:
- Stronger earnings: U.S. companies have delivered four consecutive quarters of solid profit growth.
- A firm U.S. dollar: The strong dollar has lifted foreign investor returns.
- Sector leadership: The U.S. dominates in AI, semiconductors, cloud computing and enterprise tech.
- Market depth: With a size above $60 trillion, the U.S. provides unmatched liquidity.
- Home-country bias is weaker: U.S. companies like Apple and Microsoft are global brands, so foreign investors feel more familiar and comfortable investing in them, which increases their allocations.
Top US Stocks with the Highest Foreign Ownership
Foreign investors continue to concentrate in Microsoft (up 20% YTD), Nvidia (up 35% YTD), Amazon, Alphabet, Meta and Tesla. These companies anchor the global digital and AI ecosystem.
While foreign ownership in these firms is high, the U.S. custodial system makes the exact breakdown difficult to track. Penn Law research notes that even the companies themselves often cannot determine their true foreign ownership because most shares are held through brokerage intermediaries.
For Indian investors who want exposure to the same global leaders, Appreciate offers a simple way to invest directly in U.S. equities such as Microsoft, Nvidia or Amazon in just a few taps.
Key Takeaways
Global investors are favouring the U.S. because earnings are at a four-year high, supported by strong sectors, a firm dollar and expectations of future Fed easing. India’s FII decline reflects global rate cycles, valuation concerns and currency pressure not a weak domestic outlook. With domestic investors supporting Indian markets, the long-term story remains strong.
For diversification, Indian investors can access U.S. market leaders through Appreciate while continuing to benefit from India’s structural growth.
Disclaimer: Investments in securities markets are subject to market risks. Read all the related documents carefully before investing.
