Foreign investors have withdrawn over $17 billion from Indian equities this year through October 27, marking the lowest foreign portfolio investment levels in years. This stands in stark contrast to 2023's net inflow of $20 billion, making India the worst-hit Asian market for foreign capital outflows.
Despite the exodus, India's Nifty 50 index recently logged a six-day winning streak - its longest since September 12 - buoyed by optimism over a potential U.S.-India trade deal. The Gift Nifty futures, dollar-denominated derivatives tracking the Nifty 50, rose to 26,300 points on Friday, signaling potential new highs. As of October 29, the Nifty 50 hovered near record levels at 26,011.30 points, poised for its best monthly performance since March.
The prospective U.S.-India trade agreement could slash U.S. tariffs on Indian goods from 50% to 15-16%, with energy and agriculture as key negotiation points. Reports suggest India may reduce Russian oil imports in exchange for tariff concessions. The first phase of the deal, targeting $500 billion in bilateral trade by 2030, may conclude by November.
Analysts believe the deal could eliminate market uncertainty and propel the Nifty 50 toward 30,000 points. Harshal Dasani of INVAsset PMS notes that tariff reductions could catalyze a new bull run, given stable global risk appetite and record domestic liquidity. After three months of foreign selling, October saw net foreign buying of ₹7.362 billion ($88 million), with Sunil Subramaniam of BayFort Capital suggesting the trade deal could trigger full-scale foreign investor return.
India's market resilience stems from its shifting investor base. Since 2015, the Nifty 50 has repeatedly advanced despite foreign outflows (2018, 2022, 2024-25), as domestic mutual funds, insurers, and retail investors now dominate. Local investors accounted for 74.8% of 2025's IPO investments (₹979 billion total), versus foreign funds' ₹790 billion. The National Stock Exchange reports domestic institutional ownership at a 25-year high of 19.2%, while foreign holdings fell to 17.3% - a decade low.
Abhinav Bharti of JPMorgan observes India's "seismic shift" toward domestic capital, with households channeling savings into equities via mutual funds. Despite $17 billion in foreign outflows (the second-largest ever), domestic investors injected over $70 billion this year. New Indian IPOs have delivered 18% average returns, outperforming the Nifty 50's 9.7% gain.
This domestic appetite has made India a top IPO destination, with 300+ companies raising $16 billion in 2025 - ranking fourth globally. Vivek Toshniwal of Plutus Wealth notes unprecedented daily roadshows, calling investor enthusiasm "insatiable."
Risks loom, however. Axis Capital's Pratik Loonker warns of overvalued IPOs, with some small offerings oversubscribed 100x, potentially destabilizing markets if several major listings underperform. Meanwhile, India's Securities and Exchange Board has implemented 11 reforms to attract foreign investors, including streamlined account openings and expanded margin trading.
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