An interesting and big change has been seen in the Indian stock market in the last few months. On one hand, foreign institutional investors (FIIs) are continuously selling Indian stocks, while on the other hand, domestic investors are investing heavily in the market, especially through mutual funds and SIP (Systematic Investment Plan). Kotak Mahindra Bank founder Uday Kotak has also drawn attention towards this trend.
He posted on social media that foreign investors are selling Indian shares and exiting the market, while Indian investors are buying the same shares. According to Uday Kotak, foreign investors look “smart” in the short term because, in dollar terms, returns on the Indian stock market have been almost zero in the last one year. This means that even though the market has given some returns in rupee terms, foreign investors have not made any significant gains in dollar terms.
Why are foreign investors leaving?
Looking at the data the picture becomes even clearer. So far in 2025, foreign investors have sold shares worth about ₹2 lakh crore, while during the same period, domestic investors have invested about ₹3 lakh crore through SIPs and equity mutual funds. On an average, more than ₹30,000 crore is coming into the market through SIPs every month, reflecting the strong confidence of domestic investors.
However, the problem from the perspective of foreign investors is the continued weakening of the Indian rupee. 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. As the rupee weakens, they suffer losses against the dollar, making their net returns in dollar terms zero or negative.
Why are foreign investors not getting returns?
On the other hand, the picture is not entirely rosy for Indian investors either. Investors who started SIPs around this time last year have seen an average return of just 5 per cent in large-cap funds, while returns in mid-cap funds have been negative in many cases, and the small-cap segment has faced even more pressure. So, the question is who will be right in the long run—foreign investors, who are currently adopting a cautious approach given the weak rupee and global uncertainties, or domestic investors, who are continuing their regular investments considering the market decline as an opportunity? According to Uday Kotak, the correct answer to this question will become clear only with time, because the real test of understanding and patience in the stock market is always in the long run.