Foreign portfolio investors have been withdrawing their investment from India’s capital (stock) market for October 2024. In the month of February 2025, an investment of Rs 34,574 crore (more than US $ 397 crore) has been withdrawn from the Indian stock market by foreign portfolio investors. In the year 2025, an investment of more than Rs 137,000 lakh crore (US $ 1,600 crore) has been invested by foreign portfolio investors from the Indian stock market. Many reasons are being counted by foreign portfolio investors for extracting their investment from the Indian stock market. Firstly, the decline in India’s gross domestic product in the first and second quarter of the financial year 2024-25 was one of the main reasons, followed by the decrease in profitability of Indian companies in the September 2024 quarter as a second reason. But now the new announcements being made by the administration of newly elected President Trump in the US in the context of tariffs are also being considered as an important reason. The Trump administration has increased the rate of tariff on various products imported from China, Canada and Mexico to the US and now it is also announced that the US will also impose tariffs on 2 April 2025 on the import of various products from all these countries, like the tariff, like the tariff to import American products by various countries including India. The Trump administration even says that India imposes up to 100 percent tariff on the import of some products in its country, so now the US will also impose up to 100 percent tariffs on imports of some products from India to America. It is very possible that India’s pharma region, automobile sector, engineering sector and information technology have adverse effects.
The portfolio of foreign portfolio investors in India’s stock market has fallen by about 20 percent. Foreign portfolio investors are realizing that it may have declined further, so foreign portfolio investors are still continuously withdrawing their investment from the Indian stock market. Secondly, foreign portfolio investors seem to be comparatively expensive to the Indian markets as shares of companies from China and some other countries are available cheaply in the stock market of these countries. American portfolio investors are investing their investment from India and investing in China, US and other emerging markets due to the high level of bond yields (above 4.75 percent) in the US. At the same time, there is a constant pressure on the Indian rupee due to the constant strengthening of the US dollar in the international market and the Indian rupee has been devalued. In recent times, the value of an US dollar has reached India’s level of about 88 rupees, this has also reduced the income of foreign portfolio investors in India’s stock market and has adversely affected their profitability.
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In September 2024, the portfolio of foreign portfolio investors made in Indian companies was worth US $ 40,000 crore which has fallen to US $ 30,400 million today. It has recorded a huge decline of 25 percent. From April 2, 2025, the Trump administration may still have a constant pressure on the Indian capital market due to the announcement of reciperoot tariffs on India. However, at the same time, Indian institutional investors and retail investors are investing in large quantities in shares of Indian companies, so the Indian stock market has not fallen too much. But still, the atmosphere in the Indian stock market is deteriorating.
Till now, developed countries were making their economic policies based on the policies of globalization and there was pressure on other developing countries of the world to open their doors for developing countries of the world, complying with these policies so that institutional investors of these countries could increase their investment in the capital markets of developing countries. Whereas today, especially the US, describing the policies of globalization as dust, is seen taking a U turn in the context of the policies of globalization only by keeping our country in the first place. Increasing the tariff for any country is like a dreaded sword. In any country where a large amount of tariffs are being increased, the citizens of that country definitely increase the possibility of heavy burden due to the cost of these products. Because, the risk of expensive items being imported into the country to increase tariffs increases, which increases the rate of inflation in that country and increases the possibility of economic recession.
Russia has also announced a tariff on four -wheelers being imported from China. China has captured the 3/4 automobile market in Russia today. China, however, has increased its exports to Russia by shocking western countries in terms of export of four -wheelers in Russia. Initially, Russia liked all this, but now it is feeling that dependence on only one country is not appropriate in the matter of import of any product. Therefore, Russia has now started putting tariffs on four -wheelers imported from China. Also, Russia now wants to establish manufacturing units producing four -wheelers in its country so that new employment opportunities can be created in Russia itself.
Due to the tariff war, the risk of economic recession in America is also increasing. However, it is also being prone to 2024. JP Morgan had earlier stated in one of his assessments that the possibility of economic recession in the US is 17 percent while now in an assessment based on one of its new research, it has been stated that the possibility of economic recession in American has increased by 31 percent. Similarly, Goldman Sachas also expressed a possibility of 14 percent of the economic recession in the US in the past, which has now increased to 24 percent. The US is putting tariffs on the import of various goods in its country as the Trump administration wants to make America once again, but it seems to have an adverse effect on the American economy. The US stock market Nasadak has come down more than 7 percent during the last month, Dow Jonas has come down around 4 percent and is broken around S&P-500, 5 percent. The US has recorded a decrease of 0.2 percent in consumer spending in January 2025 months. Increase in consumer spending for the development of any economy plays a very important role. Along with this, there is also no uniformity in the announcement of tariff decisions of Trump administration. Sometimes an announcement is being made to increase the tariff on a country, sometimes it is being withdrawn, sometimes the time of its implementation is being changed, sometimes the period of implementation is extended. Overall, the US capital market does not seem to be determined by the decisions in the capital market, which is breaking the confidence of investors investing in the capital market. And, eventually all this is also seen falling on the capital (stock) market of other countries including India.
However, the basic basis of the American economy remains very strong. In the US, 150,000 employment opportunities have been created in the US in February 2025, it cannot be a sign of economic recession, but it is a sign of a strong American economy. Yes, the growth rate of the US economy may decrease. According to an estimate by Morgan Stanley, this year the growth rate in the US may come down to 1.5 percent. The US Federal Reserve, due to the slow economic growth rate in the US, is very possible that the US Fed rate (interest rate) decrease soon, this can reduce bond yields in the US and increase the pressure on the US dollar, it can strengthen the rupee and eventually the foreign port Pho Leo investors can return to India once again.
– Prahlada Sabnani
Retired Deputy General Manager,
state Bank of India
K-8, Chetakpuri Colony,
Jhansi Road, Lashkar,
Gwalior – 474 009
