After investing a staggering amount in May, foreign investors turned net sellers with a withdrawal of Rs 8,749 crore from the Indian equity markets in the first week of this month triggered by renewed US-China trade tensions and rising US bond yields.
This momentum follows a net investment of Rs 19,860 crore in May and Rs 4,223 crore in April, data with the depositories showed.
Prior to this, foreign portfolio investors (FPIs) had pulled out Rs 3,973 crore in March, Rs 34,574 crore in February, and a substantial Rs 78,027 crore in January.
With the latest withdrawal, the total outflow has reached Rs 1.01 lakh crore in 2025 so far.
"This bearish sentiment was triggered by renewed US-China trade tensions and rising US bond yields, which steered investors towards safer assets," Himanshu Srivastava, associate director - manager research, Morningstar Investment, said.
Besides, a US investigation into Adani Group's alleged sanction violation on Iran further weighed down investor confidence and dragged down key equity indices, he added.
However, the unexpected monetary action from the RBI, combining a 50 basis points repo rate cut with a 100 basis points CRR (Cash Reserve Ratio) reduction, boosted market sentiments significantly.
"With growth prospects in the US and China looking bleak, India stands out as a resilient economy which can deliver above 6 per cent growth in FY26.
"The only concern is the high valuations which leave not much room for the rally to continue," VK Vijayakumar, chief investment strategist, Geojit Investments, said.
Apart from equities, FPIs pulled out Rs 6,709 crore from debt general limit and Rs 5,974 crore from debt voluntary retention during June 2-6.
They have been consistently selling in the debt market too due to the low differential in bond yields between US and Indian bonds, Vijayakumar added.