Global Trade Tensions Spark Market Volatility, Triggering Massive FPI Outflows
New Delhi, April 6 – Foreign portfolio investors (FPIs) have withdrawn ₹10,355 crore from Indian equity markets in just four trading sessions this month, driven by rising global uncertainty following the United States' sweeping new tariffs on several countries, including India.The sharp outflow from April 1 to April 4 comes after a net inflow of ₹30,927 crore during the six trading sessions between March 21 and March 28, which had helped cushion March’s overall outflow to ₹3,973 crore, as per data from depositories.
FPI Exodus Reflects Tariff-Driven Global Market Jitters
This latest exodus signals a marked shift in investor sentiment, with geopolitical and trade developments weighing heavily on market confidence. In the first quarter of 2025, foreign investors have already pulled out ₹1.27 lakh crore from Indian equities."These tariffs, which were much steeper than anticipated, have sparked fears of a broader economic impact," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
He pointed to the 10% base tariff on all US imports, 25% on automobile imports, and a steep 26% reciprocal tariff on Indian goods as key concerns. "Such measures could fuel inflation in the US and potentially tip its economy towards stagflation," Vijayakumar warned.
Tariff Shock Triggers Global Sell-Off
The announcement of the US tariff measures sent shockwaves across global equity markets, with the S&P 500 and Nasdaq plunging over 10% in just two days. Analysts fear the start of a full-blown trade war, which could undermine global trade and economic growth.However, Vijayakumar noted that the drop in the dollar index to 102 might create favorable conditions for capital inflows into emerging markets like India.
Debt Market Also Sees Outflows
The impact of the global uncertainty wasn’t confined to equities. FPIs also pulled out ₹556 crore from the debt general limit and ₹4,038 crore from the debt voluntary retention route, reflecting widespread caution among foreign investors.RBI Policy, Rate Cut Expectations in Focus
Looking ahead, investors are expected to closely monitor policy signals from the Reserve Bank of India (RBI), with speculation building around a possible rate cut."The RBI’s upcoming monetary policy announcements will be critical in shaping investment strategies for the coming cycle," said Manoj Purohit, Partner & Leader, FS Tax, Tax & Regulatory Services, BDO India.
As global markets grapple with rising protectionism and shifting central bank policies, foreign investment flows are likely to remain highly sensitive to further economic developments.
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