Trump’s flip-flops on ‘reciprocal tariffs’ have left investors gushing for clarity since the start of April, negatively impacting flows into emerging markets like India. Outflows from foreign institutional investors (FIIs) from India gathered pace in October last year, largely around the time of Trump’s victory, partly influenced by concerns over his tariff policy and its implications.
This trend of outflows persisted for about five months, with the most intense selling seen between February-mid March. However, a few weeks before the official tariff announcement on April 3, FIIs had turned into net buyers of Indian equities after a one-month long selling spree, hinting towards a change in sentiment after the market downturn.
Despite that though, FII flows turned inconsistent once again, after Trump announced his plans for imposing reciprocal tariffs on trade partners, including India. Trump’s reciprocal tariffs sent global financial markets into a pile of uncertainty, sparking heavy selling that wiped out trillions of dollars from stock markets across the globe.
According to VK Vijayakumar, Chief Investment Strategist, Geojit Investments, it has been the turbulence in global stock markets following Trump’s reciprocal tariffs that has been impacting FPI investments in India too.
“FPIs who had turned buyers in India during March 20-27 have again turned sellers during this turbulence. In April thus far, FPIs sold Indian equities worth Rs 31,988 crore. After the resumption of this selling, the total FPI selling in the Indian equity market in 2025 has surged to Rs 1.62 lakh crore,” Vijayakumar noted.
A similar trend was also seen across other emerging markets as FPI inflows turned negative across all major markets in April so far, with Taiwan being the sole exception. South Korea recorded the highest outflow at $6bn, followed by India ($1.9bn), Brazil ($1bn), and Malaysia ($510mn). Other markets, including Indonesia ($228mn), the Philippines ($83mn), Thailand ($218mn), and Vietnam ($371mn), also witnessed net outflows. In contrast, Taiwan stood out with positive FPI inflows totalling $446mn.
Looking ahead, Vijayakumar believes a clear pattern in FPI strategy will emerge only after the ongoing chaos dies down. In the medium term, Vijayakumar holds the view that FIIs will likely turn buyers in India, especially since both the US and China are headed for an inevitable slowdown as a result of the ongoing trade war.
“Even in an unfavourable global scenario India can grow by 6% in FY26. This, along with better earnings growth expected in FY26, can attract FPI investments into India once the dust in the market settles down," he stated.
Analysts at Elara Capital also hold on an optimistic outlook for FII inflows in the future. They note that the tariff trade strategy has been in play for the past six months and feel that it now appears to have run its course with the recent market rout. “As such, further significant market damage from this narrative seems unlikely,” the brokerage wrote in a note.
