Foreign investors withdraw from Indian equities due to Trump’s tariffs, causing market turmoil and uncertainty in global capital flows.
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Foreign investors pulled out heavily from Indian equities in the first week of April, reacting to US President Donald Trump’s reciprocal tariffs.

According to data from the National Securities Depository Ltd (NSDL), foreign portfolio investors (FPI) sold equities worth ₹10,355 crore during the week (April 2- April 4). The outflows come amid heightened global uncertainty and a sharp risk-off sentiment in financial markets. However, the pace of FPI selling had eased in March as foreign inflows picked up in the last week of the month. This helped bring down net outflows in March to ₹3,973 crore, a significant improvement compared to net selling of ₹34,574 crore in February.

However, in April first week the global markets have entered a phase of turbulence after President Trump announced reciprocal tariffs on several countries, sparking fears of a trade war. This announcement, which came on the US Liberation Day, led to massive sell-offs across markets. US stock markets alone lost around $5.4 trillion in market capitalisation within two days of the tariff announcement. The uncertainty has also hit the US debt and IPO markets. Not a single corporate debt issue has taken place in the US over the past two days, and planned IPOs have been postponed. With markets in turmoil, investors are choosing to hold back fresh capital and adopt a “wait and watch” approach.

Market expert Ajay Bagga told ANI that sharp foreign inflows into Indian markets are unlikely in the near term. “We don’t expect sharp inflows for now into the Indian markets till there is some semblance of order created out of the disorder unleashed by Trump Tariffs. He added that the recovery in market sentiment could take months, unless trade negotiations are concluded quickly, which could lead to a faster rebound.

Bagga clarified that the recent FPI selling in India is more of a liquidity-driven move, with global emerging market and India-specific funds redeeming their holdings to meet liquidation pressures. “There is no negative on India, as the $80 billion of Indian exports to the US are too small a number in comparison to the scale of the $4.2 trillion Indian economy,” he added. Despite the current volatility, experts believe India remains fundamentally strong, but global uncertainties will continue to influence capital flows in the short term.

Published on April 5, 2025