The poor performance in dollar terms led to record FPI outflows of more than ₹1.55 lakh crore from Indian equities, as of 22nd December 2025
| Photo Credit:
Baris-Ozer
While Indian equities have generated double-digit gains in rupee terms in 2025 so far, depreciation of the Indian currency against the dollar has sharply eroded those gains for foreign investors. India’s US dollar returns trail all other major markets, a development that coincides with record foreign portfolio investor outflows and renewed concerns over India’s relatively high market valuations.
businessline analysis of data from Bloomberg shows that the Nifty 50 has risen 10.47 per cent so far this year in local currency terms. However, in dollar terms, Nifty 50’s returns fall to just 5.44 per cent, the lowest, among major global equity benchmark indices.
According to Bhushan Kedar, Director of Fixed Income Research at Crisil Intelligence, “a key factor is the Indian rupee’s depreciation of over 5.5 per cent against the US dollar, which has reduced returns for foreign investors. Trade tensions have also played a role, with the US imposing a 50 per cent reciprocal tariff on India. In contrast, a weaker dollar has boosted returns in other emerging markets, such as Korea and Latin America.”
South Korea’s KOSPI had local-currency gains of about 71 per cent, translating almost fully into dollar returns as well. Markets such as Brazil, Germany, Singapore and the UK posted significantly higher returns in dollars. The appreciation in their currencies against the dollar appears to have boosted FPI returns in these countries.
FPI outflows
The poor performance in dollar terms led to record FPI outflows of more than ₹1.55 lakh crore from Indian equities, as of 22nd December 2025. With a price-to-earnings ratio of 21.6, Indian equities are also more expensive than most other major markets. As Kedar observes, “India’s high valuations have made it less attractive to global investors, who have rotated their funds to cheaper markets like Korea and Brazil.”
According to Akshat Garg, Head of Research and Product at Choice Wealth, “global capital gravitated towards markets such as the US, where a narrow set of large technology-driven stocks delivered outsized gains.”
What lies ahead
“With domestic institutional investors (DIIs) emerging as net buyers in 2025, the market’s dependence on FPI flows has reduced, making it more resilient. While there are potential risks and uncertainties, India’s markets are well-positioned to navigate the challenges ahead,” says Kedar.
“Even if foreign participation remains selective, India is structurally better placed than in the past due to the growing depth of domestic capital, which provides a more stable foundation to the market,” adds Garg.
Published on December 23, 2025
