Whalesbook
Consecutive Capital Flight Continues
November marked the third consecutive month of net Foreign Direct Investment (FDI) outflows, with capital leaving Indian shores totaling $446 million. This sustained departure follows outflows of $1.67 billion in October and $1.66 billion in September, starkly contrasting with a minor $215 million inflow in August. The trend exacerbates the existing exodus from equity markets, where Foreign Portfolio Investors (FPIs) have already withdrawn $3.36 billion year-to-date in 2026, adding to the $18.91 billion exit observed throughout 2025.
RBI Cites Trade Uncertainty and Currency Weakness
The Reserve Bank of India attributed the muted foreign investment flows to uncertainty surrounding the India-US trade deal and the weakening of the rupee. On a gross basis, FDI into India in November reached $6.41 billion, a marginal 2% dip from October but a 22% increase from November 2024. Japan, Singapore, and the US collectively accounted for over three-quarters of these gross inflows. The financial services sector was the primary recipient, attracting around 75% of the total, followed by manufacturing and retail trade.
Repatriations Swell Outflow Figures
Despite a significant halving of outward FDI by Indian companies to $1.51 billion in November compared to October, foreign investors repatriated a substantial $5.34 billion. This repatriation figure was the highest recorded since December 2024. More than 70% of the outward FDI from Indian firms was directed towards manufacturing, financial, insurance, and business services sectors. The combined pressure from outward investments and foreign investor exits has significantly weighed on the rupee.
Rupee's Record Plunge and Economic Implications
The rupee's precipitous decline culminated in breaking past the 90 and 91 per dollar marks in early December, reaching a new all-time low. While the RBI's market interventions have provided some relief, the currency weakened sharply this week, closing at 91.71 on Wednesday. Madan Sabnavis, Chief Economist at Bank of Baroda, noted that the depreciating rupee offers an export advantage amid existing US tariffs but warned that continued depreciation heightens corporate uncertainty. "This leads to more caution being shown," he stated.
Shifting Global Investment Dynamics
For the first eight months of the 2025-26 fiscal year, overseas investments by Indian companies and foreign repatriations aggregated $59.1 billion, up from $55 billion in the same period of the previous fiscal. Net FDI inflows for April-November 2025 stood at $5.63 billion, a stark contrast to the $959 million received throughout all of 2024-25. Gross FDI inflows for the period amounted to $64.73 billion, lower than the $80.62 billion recorded in the entire previous fiscal year. Chief Economic Advisor V. Anantha Nageswaran pointed to rising interest rates in developed nations and a global push for localized supply chains, forcing India to compete fiercely for capital. He added that Indian companies are increasingly investing abroad to serve those markets directly, emphasizing the need for India to "up its game" in attracting FDI and global supply chain companies.