Foreign outflows weigh on India’s dollar returns in 2025

Foreign portfolio investors withdrew nearly $18 billion from Indian equities during 2025, marking one of the largest annual outflows on record. Despite strong domestic participation and nominal index gains, currency depreciation and capital exits resulted in Indian benchmarks ranking among weaker global performers in dollar terms. The trend highlighted sensitivity to global risk sentiment and shifting capital flows.

India’s central government reported a fiscal deficit at 6.2% of the full year’s budget target by the end of November, higher than the same period last year. Elevated expenditure on subsidy programmes and capital outlays contributed to the gap despite higher tax receipts. Policymakers noted that continued revenue mobilisation and expenditure control will shape the year-end fiscal outcome heading into 2026.