Source The economics Times
MUMBAI: December 14, 2025 — Foreign investors have engaged in an unprecedented selling spree in the Indian equity market throughout 2025, offloading shares at an alarming rate of nearly ₹152 crore every single trading hour.
This relentless outflow by Foreign Institutional Investors (FIIs) has resulted in a cumulative net secondary market sale of over ₹2.23 lakh crore for the calendar year, making 2025 one of the toughest years on record for foreign investment in Indian stocks.
DIIs Act as Shock Absorbers
Despite this massive and sustained selling pressure, the benchmark indices, including the Nifty and Sensex, have demonstrated remarkable resilience. Market analysts attribute this stability almost entirely to the robust counter-buying from Domestic Institutional Investors (DIIs), primarily driven by continuous systematic investment plan (SIP) flows into mutual funds.
DIIs Step In: Domestic funds have effectively absorbed the entire foreign shock, purchasing substantially more shares than FIIs sold during the year. For instance, in December alone, FIIs sold close to ₹15,959 crore, which was completely eclipsed by DII buying of around ₹39,965 crore.
Growing Market Maturity: Experts view the DIIs’ ability to neutralize the foreign selling as a sign of growing maturity and deep-rooted domestic capital in India’s equity ecosystem.
The Complex FII Narrative
The FII exodus is not a blanket rejection of the India growth story. While secondary market selling has been aggressive, FIIs have simultaneously invested a significant ₹67,000 crore in the primary market (IPOs and QIPs) in 2025. This suggests continued long-term confidence in select Indian businesses and the overall economic trajectory.
Several temporary factors have been cited for the massive FII sell-off:
Global Liquidity: Tightening global monetary policies and the appeal of higher-yielding assets in developed markets.
Rupee Depreciation: The Indian rupee’s slide to new record lows has made returns less attractive in dollar terms for overseas investors.
Valuation Concerns: Some foreign investors feel that Indian equities continue to command a high valuation premium compared to other emerging markets.
Geopolitical and Trade Headwinds: Lingering global uncertainty and delays in key trade agreements have also weighed on sentiment.
Outlook for 2026
Market strategists largely agree that sustained foreign selling at the current pace is becoming increasingly difficult, especially given India’s strong economic fundamentals and improving corporate earnings visibility for the next fiscal year.
“Holding large short positions in a market with strong domestic inflows and a healthy economic outlook is not a sustainable strategy,” noted one Chief Investment Strategist. While the current pressure is palpable, a sustained reversal in FII flows is anticipated once global liquidity conditions ease and external account pressures stabilize.
