Turnaround expected in foreign fund flows

MARKET PARTICIPANTS

- ANANYA GROVER

ARE expecting a turnaround in the coming year after Indian equities witnessed the highest-ever foreign fund outflows in 2025.Their expectations hinge on a trade deal with the US, policy reforms and the investor behaviour towards overvalued AI stocks.

In 2025, foreign investors net withdrew ₹1.53 lakh crore from equities as of December 26. This was driven by rising US bond yields, a stronger dollar and capital reallocation towards developed markets and regions, such as China, Taiwan and South Korea, benefiting from AIand semiconductor-led growth, according to a note from Motilal Oswal. Muted corporate earnings growth also contributed to outflows from sectors like IT and FMCG, it said.