Global Conflicts Temper FPI Optimism on India Outlook

FPIs remain net sellers for 2025, and experts expect more outflows if Israel-Iran war lingers

- Abhinaba Saha

Cautious investor sentiment because of the Israel-Iran conflict has sparked a significant flight of foreign capital from India, reversing recent inflows. Foreign portfolio investors (FPIs) have already pulled nearly ₹6,232 crore from domestic equities in June. This outflow follows ₹19,860 crore and ₹4,223 crore of inflows in the preceding two months, respectively. FPIs remain net sellers this year, and experts expect further outflows if the conflict extends.

"FPIs are free birds and aren't under any compulsion to buy stocks at specific prices to support the counter, like we do," said Apurva Sheth, head of market perspectives and research at Samco Securities. "Their latest position in the derivatives segment shows that they are heavily bearish on the Indian stock market."

But experts also say such concerns might be transitory as India still offers the best growth story in an era of global slowdown. "India's macro fundamentals are head and shoulders above any other top 10 economy in the world," said Vikas Gupta, CEO and chief investment strategist at Omniscience Capital. "From GDP growth numbers to inflation control, building forex (foreign exchange) reserves to maintaining forex stability, even controlling the fiscal and current account deficits, from all angles we are one of the strongest worldwide."