Foreign investors pull out ₹35,000cr from Indian equities in September
What's the story
Foreign portfolio investors (FPIs) have pulled out over ₹35,000 crore from Indian equities in September. The withdrawal comes after two months of inflows, highlighting a trend that goes beyond just the ease of entry into the Indian market. While SEBI and RBI are working to simplify onboarding and reduce regulatory friction for foreign investors, other factors such as returns, yields, currency fluctuations, and global risk continue to influence their decisions.
Market performance
FPI withdrawals in September
According to depository data, FPIs withdrew ₹35,860 crore from Indian equities in September.
This came after investments of ₹20,200 crore and ₹29,630 crore in July and August, respectively.
The withdrawal coincided with a major correction in Indian equities, with the Nifty 50 and Sensex falling nearly 6% each.
Regulatory reforms
SEBI, RBI working to reduce operational hurdles for foreign investors
SEBI Chairman Tuhin Kanta Pandey has said that the regulator is working to address operational hurdles faced by foreign investors.
He said SEBI has already eased the onboarding process and access for FPIs, and is working with RBI on further steps.
The regulatory push includes faster digital FPI registration, streamlined KYC requirements, and measures to reduce documentation and operational costs.
New initiatives
SWAGAT-FI framework introduced by SEBI
SEBI has also introduced the SWAGAT-FI framework to provide a more streamlined onboarding route for trusted, lower-risk foreign investors.
The regulator has also introduced a framework for net settlement of funds for FPI transactions, aimed at reducing operational friction and costs.
However, despite these measures, the September FPI numbers show that easier access alone cannot guarantee higher equity inflows.
Market competition
India 'in a competitive situation' regarding investment choices
Pandey acknowledged that FPIs consider net returns when making investment choices.
He said India is "in a competitive situation" regarding the options foreign investors have.
This highlights that even if an investor finds it easier and faster to access Indian markets, they may not necessarily invest more in Indian equities if competing markets offer better net returns.
Economic pressures
Factors behind foreign outflows from Indian equities in September
The September sell-off came amid tough global conditions for emerging-market assets. Rising US interest rates and bond yields made dollar-denominated assets more attractive.
High crude oil prices added pressure on India, a major oil importer, while a weaker rupee could lower dollar-based returns for overseas investors.
These factors were among the reasons behind the September foreign outflows from Indian equities.