FPI flow trends June 2025: From sell offs to comebacks

FPI flows for June were anything but linear as the month unfolded as a dramatic seesaw. There were sharp foreign selloffs, particularly in debt, while also a surprising comeback in equities - all against a backdrop of shifting global sentiment and domestic policy pivots.

Debt market: From inflows to a relentless sell-off

If you track the debt market, June’s story is one of abrupt reversal. After a robust Rs. 12,155 crore inflow in May, foreign portfolio investors (FPIs) offloaded a staggering Rs. 25,038 crore from Indian debt in June. The sell-off was widespread: Rs. 12,988 crore pulled from the Fully Accessible Route (FAR), Rs. 6,144 crore from the Voluntary Retention Route (VRR), and Rs. 5,906 crore from the general limit. This wasn’t an isolated event—volatility has been the norm all year, with March’s record Rs. 37,789 crore inflow quickly giving way to April’s Rs. 24,384 crore exodus.

Why did FPIs turn so bearish on Indian debt? The triggers were global as well as local. Rising US yields, renewed geopolitical tensions, and uncertainty over global trade policies made Indian debt less attractive. The sudden reversal in June also reflected profit-booking after the previous months’ strong inflows, as well as caution ahead of the US Federal Reserve’s policy signals.

Equities

Equity flows, however, told a more nuanced story. In the first week of June, you would have seen FPIs pulling out Rs. 8,749 crore from Indian equities, due to global uncertainty and high valuations. However, this negativity was short-lived. The Reserve Bank of India’s surprise 50 bps repo rate cut, coupled with a 100 bps CRR reduction, injected fresh optimism into the market. The Nifty responded with a 3.1% gain for the month, and by the end of June, FPIs had pumped a net Rs. 14,590 crore into equities.

This surge was not just a numbers game. The rate cut signalled a pro-growth stance, boosting expectations for corporate earnings and aggregate demand. What further strengthened the investment case was the positive macro backdrop, which had India reporting a $13.5 billion current account surplus in Q4FY25 and bringing the full-year deficit down to just 0.6% of GDP.

Sectoral Shifts

Wondering where FPIs parked their capital? The first half of June saw net equity inflows of $816 million, with sectoral divergence reflecting “cautious optimism”. Telecom led the pack with Rs. 825 million in net inflows, due to rising data consumption and tariff stability. Services, capital goods, and oil & gas also saw strong interest, driven by optimism around infrastructure spending and resilient consumption trends.

Yet, not all sectors were in favour. FPIs trimmed positions in IT (outflows of Rs. 319 million), healthcare, power, and autos, citing margin pressures, currency volatility, and global trade worries. The threat of US tariffs on Indian pharma exports and concerns over India’s power output also weighed on sentiment.

Financial services attracted the highest inflow (Rs. 4,685 crore) despite the overall equity outflow in the first fortnight of June. This selective accumulation was fuelled by robust bank earnings and attractive valuations, but it didn’t necessarily signal long-term conviction. Instead, it reflected a tactical allocation in a volatile environment.

A Week of Turnarounds

The third week of June marked a turning point. FPIs returned with gusto, infusing Rs. 12,223 crore into Indian markets—90% of it into equities. Even the debt market saw a modest inflow, reversing the earlier trend of relentless selling. This swing was driven by easing US dollar strength, improved domestic liquidity and renewed risk appetite as global fears moderated.

By the end of June, the mood had shifted. On June 27 alone, FPIs invested Rs. 10,643 crore in Indian equities, bringing the week’s net inflows to Rs. 4,546 crore. This late-month surge helped offset the earlier outflows and reaffirmed India’s status as a preferred emerging market destination.

Conclusion

As you reflect on June, the lesson is quite clear - FPI flows are increasingly tactical, driven by a complex interplay of global cues, domestic policy, and sector-specific fundamentals. The sharp sell-off in debt and the late surge in equities show that you can’t afford to take FPI trends at face value—they’re as likely to reverse as they are to persist.

For investors, the message is to stay nimble. Watch for policy signals, track sectoral flows, and be prepared for volatility. June 2025 proved that even in an era of global headwinds, India can attract foreign capital—provided the macro story remains compelling and policymakers are willing to act decisively.