Net is minus as dollars fly away

Foreign money flew out of India, as net FDI (foreign direct investment) turned negative in November 2025, for the fourth consecutive month. While the figure was minus 446 million in November, the figures were much higher at more than $1.6 billion each in September and October 2025, and more than $600 million in August. Hence, while the net outflow in the August-November period was $4.4 billion, there was a net FDI inflow of nearly $10 billion in the four months of April-July 2025 period. This is a worrisome trend as most experts feel that FDI inflows and outflows determine the interest among the foreign investors to pump money into the Indian economy.

However, the trend does not indicate a complete loss of interest among the foreign investors. According to the latest data released by the Reserve Bank of India (RBI), gross FDI inflows, or inflows without adjustments against FDI outflows, were $6.4 billion in November 2025, which was substantially (22.5 per cent) higher on a year-on-year basis. But they were lower than the $6.5 billion gross inflows in October, and $7 billion in September. Still, as the data indicates, the gross total for the three months stood at a healthy $19.9 billion. “Gross inward FDI remained steady in November (2025) with Japan, Singapore, and the US accounting for more than 75 per cent of the total FDI inflows,” stated a recent RBI report.

What turned the FDI tide were massive foreign outflows due to repatriations and disinvestments by the foreign firms operating in India, and Indian firms, which made investments abroad. The first accounted for a huge $5.3 billion in November, the highest in the past five months, though 1.2 per cent lower on a year-on-year basis. Outward investments by Indian firms stood at $1.5 billion in November, and they were less than half of $3.2 billion in October. “Outward FDI moderated… with Singapore, Mauritius, the US, and the UK accounting for more than half of total…,” stated RBI.

For economists, the trends indicate both worrisome and positive issues. On an overall basis, disinvestments by the foreign firms may indicate that they are not keen on India. Repatriations hint that the foreigners are interested to take more money out, either because their profits from the Indian ventures are up, or because they feel that this is the time to indirectly cash out. Manufacturing, along with financial and insurance services, were responsible for more than 70 per cent of the FDI outflows. This implies that most of the action related to the money going out is happening in manufacturing.

In contrast, “The highest recipients (around 75 per cent) of FDI inflows (without adjustments for outflows) were the financial services sector, followed by manufacturing, and retail and wholesale trade,” noted the RBI report. This may indicate that the bulk of the money coming in is going into the services sector, rather than manufacturing. Recent reports indicate massive acquisitions, takeovers, and purchases of strategic stakes by the foreigners in banking, and financial services. This is contrary to what the Government wants, which is more inflows in manufacturing through schemes such as ‘Make-in-India,’ and PLI.

Of course, as many experts point out, the sub-trend in FDI flows, which pertains to Indian firms investing abroad, is a huge positive. This implies that some of the Indian firms have emerged as global MNCs, and wish to expand and enhance their international presence. Over the past two decades, Indians have purchased strategic stakes in natural resources properties such as coal, minerals, and oil and gas across the world. There were acquisitions of iconic names in sectors such as steel, passenger cars, and other areas. In addition, as recent reports indicate, Indian IT and software firms are aggressively eyeing foreign acquisitions for strategic requirements. According to reports, Indian acquisitions abroad surged in 2025, and outbound M&As reached $25 billion, or nearly an increase of a third compared to 2024.

Indians leveraged strong balance sheets, and stock valuation arbitrage to acquire assets in Europe and the US. The Indian Government has actively encouraged such overseas activity, as outbound deals accounted for a quarter of M&As in 2025. In November 2025, EY said that total M&As rose 37 per cent, and were worth $26 billion across 650 transactions in the first three quarters. The deal market “demonstrated both resilience and strategic maturity, marked by a sharp rise in mid-sized transactions.”

Experts are not just semi-concerned about FDI trends. They are super worried about what is happening with Indian equities. In 2025-26 (until January 16, 2026), as per the RBI report quoted earlier, net foreign portfolio investments (FPI), or what the foreigners invest in the Indian stock markets, were negative. “After a brief phase of net inflows in October and November (2025), FPIs registered net outflows of $4.2 billion in December. The uncertainty surrounding the India-US trade deal, and the weakening of the rupee have kept net FPI flows to India muted in recent months,” stated the RBI.

One needs to remember that the initial indications by the Indian ministers and negotiators were that the bilateral trade deal would be finalised by the autumn of 2025. The expected deadline was extended to December 2025, and then to March 2026. Even recent reports, while optimistically hinting that the talks were on track with a few niggling issues left, did not give any timeline. The rupee has seen a free fall in 2025, after having become weaker more slowly in the earlier years. It breached the Rs 90 mark to a dollar, and continues to fall further despite interventions by the central bank.

However, some stock analysts contend that the trade deal, and rupee are contributing factors. The main issues that confront the FPIs relate to valuations of Indian equities, better and more profitable opportunities in other emerging markets, and the geopolitical disruptions due to America’s trade-tariff flip-flops. Indian stocks reached high valuations, which prompted the foreigners to book regular profits throughout 2025. This was when domestic investors pumped in huge amounts through mutual funds. Returns in other emerging markets, especially in Asia, were much higher than India, partially because of the continuous selling by the foreigners.

Of course, the contradictory, and extreme decisions by the US president, Donald Trump, and the Federal Reserve’s decisions have had an impact on the investment strategies of the FPIs. For example, again in the recent past, foreign investors have sought safe and secure refuge in relatively risk-free assets like gold. The bullion prices, after a short stall, rose again, and reached record highs.