Kolkata: FPIs are overseas investors like funds, banks, or families, which are registered with Sebi. The flow of FPI capital into the markets are very significant since the volume of the net inflows often determine the sentiment of the market and investors. Reports indicate that FPI flows into India is quietly undergoing a shift in the past 10 years with investors in the US and Europe gradually rising in prominence and overtaking those in traditional tax haven such as Mauritius and Singapore in the backseat.
Data sourced from ICICI Securities have shown that US-based FPIs have contributed as much as 44% of FPI equity assets in India as of December. This share of US-based FPIs was as much as 10 percentage points less, or 34%, 10 years ago. Steady rise of FPI share has also been reported from countries such as Ireland and Norway. On the other hand, the share of FPI assets belonging to those based in Mauritius has nosedived from 21% in 2015 to 4.1% in 2025.
Foreign investors pulled out $18.8 billion from Indian equities in 2025, which is a record amount in any year. Analysts have attribute it to stretched valuations that FIIs were paying for India was due to the strong bull run the stock market in the preceding couple of years. The earnings growth in India in last year was far lower than the levels investors were looking for — in single digits.
Stricter tax rules a decider
According to reports, the shift has been attributed to stricter tax norms and stricter regulatory disclosures. The logic: the stricter disclosure norms has made it difficult for routing flows through tax havens such as Mauritius and Singapore. Tax havens like Mauritius had tax agreements which gave them exclusive right to capital gains taxation and therefore funds from global investors were routed through these countries, said analysts. But the scenario changed in 2017 when India amended the tax treaty where the government can levy tax on the gains of sale of Indian company shares by entities of Mauritius and Singapore. Therefore, the tax benefits of investing through the tax havens have vanished.
Sebi tightens disclosure norms
On another front, capital markets regulator Sebi has tightened disclosure norms of FPI investment. Sebi now requires full disclosure of beneficial ownership of foreign funds. With the veils now gone, it has also impacted the flow of funds through FPIs into India.
Countrywise FPI AUM (Dec 2025)
US: 32,614
Luxembourg: 5,493
Singapore: 4,794
Ireland: 4,764
UK: 3,401
Mauritius: 3,024
Norway: 2,904
Japan: 2,206
Canada: 1,935
France: 1,834
Others: 11,295
(Source: ICICI Securities; Figures in Rs billion)
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