This continued selling pressure by foreign portfolio investors (FPIs) has contributed significantly to the depreciation of the rupee against the dollar by almost 5 percent by 2025.According to NSDL data, FPIs pulled out Rs 22,530 crore from Indian equities between January 1 and January 16.
Market experts attributed the continued pullback to a combination of global and domestic factors.
“Rising US bond yields and a stronger dollar have improved risk-adjusted returns in developed markets, driving capital reallocation out of emerging markets,” said Sachin Jasuja, head of equities and founder of Centricity WealthTech.
Himanshu Srivastava, Principal-Manager Research at Morningstar Investment Research India, echoed similar views and said higher US bond yields and dollar strength have made US assets relatively more attractive. He added that geopolitical and trade-related uncertainties continue to weigh on emerging markets’ risk appetite.
According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, the continued uncertainty over the US-India trade deal has also dampened investor sentiment.
Domestically, relatively rich valuations in certain market segments, together with mixed signals from the ongoing earnings season, have led to profit-taking and portfolio rebalancing by foreign investors.
The ongoing depreciation of the rupee, which fell by almost 5 percent in 2025 and recently weakened further to around 90.44 per dollar, has eroded dollar returns despite stable index levels, further increasing pressure on FPI flows.
Vijayakumar said the selling trend could continue until clear positive triggers emerge for a sustained market rally. He added that the AI-led trading that dominated markets in 2025 has continued into early 2026, although there could be a reversal in this trend later in the year.
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