Last Updated:
Finance Minister Nirmala Sitharaman addressed the recent outflows in India’s equity markets; Here’s what she said
Finance Minister Nirmala Sitharaman speaks at a post-Budget interaction with stakeholders from India Inc in Mumbai.
Finance Minister Nirmala Sitharaman addressed the recent outflows in India’s equity markets, attributing them to the strong returns investors are booking, particularly foreign institutional investors (FIIs) who are profiting from the current economic climate. Speaking at a post-Budget press conference on Monday, Sitharaman stated that the Indian economy is providing attractive returns, which partially explains the ongoing withdrawals by FIIs. She also emphasized that India is committed to becoming an investor-friendly country, noting that several measures have been taken in recent years to rationalize customs duties.
Since October 2024, foreign portfolio investors (FPIs) have sold approximately ₹2 trillion worth of Indian equities, contributing to a decline in the market from its highs. In the first six weeks of 2025 alone, FPIs have offloaded over $10 billion (around ₹97,000 crore) worth of Indian stocks. The selloff is primarily driven by slowing corporate earnings and changes in U.S. policies that have made U.S. debt securities more attractive, strengthening the dollar and diverting investment away from emerging markets. As a result, the benchmark Sensex has dropped by around 12% from its all-time high in September 2024.
Finance Secretary Tuhin Kanta Pandey commented that FPI movements are influenced by global factors, and it is not accurate to say that investors are shifting entirely to other emerging markets. “When there is global uncertainty, they tend to return to the U.S.,” he explained, while also noting the resilience of Indian markets. Pandey assured that despite these challenges, India’s economy remains the fastest-growing large economy and is well-positioned to continue its growth trajectory despite global headwinds.
Sitharaman also touched on the broader economic context, stating that FPI outflows began in October 2024, initially sparked by China’s economic stimulus measures and later compounded by concerns over the election of Donald Trump as U.S. President. These factors led to reduced attractiveness of emerging markets and increased demand for U.S. debt.
On the topic of trade and tariffs, Sitharaman explained that India has taken various steps to rationalize customs duties, including reviewing safeguard and anti-dumping duties. “This Budget marks significant progress in reforming India’s customs duty structure,” she added, emphasizing the country’s ongoing efforts to become more investor-friendly. Finance Secretary Pandey highlighted that the U.S. and India have agreed to negotiate a bilateral trade agreement (BTA) within the next few months, which will address reciprocal tariffs and further facilitate trade.
Finally, Sitharaman commented on India’s inflation management, stating that inflation is well within a controlled range, with the latest figures showing inflation close to 4%. The government, in coordination with the Reserve Bank of India (RBI), is taking supply-side measures and monetary policy actions to keep inflation in check. This has contributed to the RBI’s decision to cut interest rates for the first time in nearly five years, with a 25 basis point reduction in the repo rate to 6.25% earlier this month. The RBI has also maintained its inflation forecast for FY25 at 4.8%, with GDP growth projected at 6.7% for FY26.
