Invest in the stock market or stay, why are foreign investors running away from the market; What is the expert’s opinion?

Indian Stock Market: An interesting and important change has been seen in the Indian stock market in recent months, where on one hand foreign institutional investors (FIIs) are continuously selling Indian shares, while on the other hand domestic investors are investing heavily in the market, especially through mutual funds and SIP. Kotak Mahindra Bank founder Uday Kotak has also drawn attention to this trend.

While posting on social media, he wrote that foreign investors are exiting by selling Indian shares and Indian investors are buying the same shares. According to Uday Kotak, foreign investors seem to be ‘smart’ in the short term, because in dollar terms, the returns of the Indian stock market in the last one year have been almost zero. That is, even though the market has given some returns in rupees, foreign investors have not got any significant benefit in dollars.

Why should FIIs run away from the domestic market?

If we look at the figures, the picture becomes clearer. So far in the year 2025, foreign investors have sold shares worth about Rs 2 lakh crore, while in the same period, domestic investors have invested about Rs 3 lakh crore through SIP and equity mutual funds. Every month an average amount of more than Rs 30 thousand crore is coming into the market through SIP, which shows the strong confidence of domestic investors.

The biggest reason for the continuous decline in rupee

However, the problem from the point of view of foreign investors is that the Indian rupee is continuously weakening. When foreign investors invest in the Indian market, they convert dollars into rupees and when they exit they have to convert rupees back into dollars. They suffer losses against the dollar due to the weakening of the rupee, making their total returns zero or negative in dollar terms.

Negative image even in case of returns

On the other hand, the picture for Indian investors is also not entirely rosy. Investors who started SIPs around this time last year have got an average return of only about 5 per cent in large cap funds, while returns in midcap funds have been negative in many cases and the small cap segment has seen even more pressure.

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Best chance for whom?

In such a situation, the question is who will prove more correct in the long term – foreign investors, who are currently adopting a cautious approach in view of the weakness of the rupee and global uncertainties, or domestic investorswho are continuing regular investments considering the market decline as an opportunity. According to Uday Kotak, the correct answer to this question will emerge only with time, because stock market True wisdom and patience are always tested in the long run.