NewKerala.com

FIIs Set Record Outflows in 2025, But 2026 Eyes a Turnaround on Earnings

Foreign Institutional Investors (FIIs) are set for a record year of net equity outflows in 2025, with selling in December alone exceeding Rs 22,100 crore. This sustained selling has significantly contributed to the rupee's depreciation this year. However, analysts forecast a potential reversal in 2026, citing robust GDP growth and an expected improvement in corporate earnings as key attractors. This outlook contrasts with strong Foreign Direct Investment (FDI), which nearly doubled in the April-October period.

Key Points: FII Outflows Hit Record in 2025, 2026 Inflows Expected

  • Record FII outflows in 2025
  • Rupee depreciation linked to selling
  • 2026 reversal predicted on earnings
  • Strong FDI inflows provide contrast
2 min read

Corporate earnings to bring back FIIs in 2026, selling in Dec crosses Rs 22,100 crore

FII selling crosses Rs 22,100 crore in Dec 2025, setting a record yearly outflow. Analysts predict a 2026 reversal driven by strong GDP growth and corporate earnings.

"As the year 2025 draws to a close, FII selling in India is on track to set a new record - Dr. VK Vijayakumar, Geojit"

New Delhi, Dec 27

Robust GDP growth and prospects of improvement in corporate earnings next year augur well for positive foreign institutional investor flows in 2026, analysts said on Saturday, even as sell figure in December crossed Rs 22,130 crore.

Foreign institutional investors have net sold shares worth Rs 1,58,407 crore in CY25, marking their heaviest selling since they started investing in India. Analysts however said that there are signs of a reversal of foreign institutional investor outflows due to macro strength and earnings visibility.

"As the year 2025 draws to a close, FII selling in India is on track to set a new record in FII outflows," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

In 2024, FIIs have been selling through the exchanges, as much as Rs 1,21,210 crore worth of equities. However, for the year, the net FII inflow was positive since they had invested Rs 1,21,637 crore through the primary market. But for 2025, the net sales figure is massive, he added.

The sustained selling by FIIs have contributed significantly to the sharp depreciation in INR this year, he said, adding that improvement in fundamentals is likely to attract net FII inflows in 2026.

Analysts said that sustained FII selling, along with the high trade deficit, contributed significantly to the depreciation of the rupee in 2025.

The rupee's annual depreciation is around 5 per cent, and it dipped marginally on Friday amid crude oil price recovery. Meanwhile, Net foreign direct investment (FDI) in India nearly doubled to $6.2 billion during April‑October from $3.3 billion a year earlier, primarily due to fall in repatriation of foreign capital despite a rise in outward FDI, an official statement has said.

Gross inward FDI rose marginally to $58.3 billion in April‑October from $50.5 billion a year ago. Repatriation or the amount of foreign capital leaving India fell to $31.65 billion from $33.2 billion during the same period.

A recent report from Emkay Global Financial Services said the weakness in the rupee may keep foreign portfolio investors (FPIs) away, with a return expected only after the currency stabilises for an extended spell (1-2 months).

The report noted that FPIs continue to be large-cap heavy with a high overweight (OW) on Financials.

- IANS

Share this article:

Reader Comments

P
Priya S
Rs 1.58 lakh crore is a massive number! 😳 But the doubling of net FDI is the silver lining here. It shows long-term confidence in India's growth story remains intact, even if FPIs are being skittish. The fundamentals are strong.
V
Vikram M
As a retail investor, this constant FII selling has been painful for my portfolio. They come, pump up prices, and then leave us holding the bag. Hope the prediction for 2026 holds true. We need stability, not this hot money in-and-out game.
R
Rohit P
The report says FPIs are "large-cap heavy" and overweight on Financials. Maybe this is an opportunity for domestic investors to look at quality mid and small caps that have been beaten down unfairly? Just a thought.
S
Sarah B
Interesting analysis. The link between FII selling and rupee depreciation is clear. The 5% annual drop hits imports and inflation. Hopefully, the predicted corporate earnings improvement materializes to reverse both trends next year.
K
Karthik V
With all respect to the analysts, we hear "next year will be better" every time there's a downturn. The proof will be in the pudding. Let's see if the government and RBI can create a more stable environment to retain foreign capital.
M
Meera T

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50