Will lower tariffs lure back FPIs from other emerging markets?

Subscribe to enjoy similar stories. The global investment landscape is bracing for disruption as the Trump administration rolls out sweeping reciprocal tariffs on nearly all countries. The baseline 10% tariff rate against all countries will go into effect on 5 April.

India faces a 27% tariff (effective 9 April) lower than many Asian peers but higher than Brazil (10%) and the Philippines (17%). Will foreign portfolio investors (FPIs) weigh tariff differentials against long-term growth prospects and reassess their allocations, and will these lower tariffs alone be enough to lure back foreign capital? After a brutal 15-week sell-off—the longest streak of foreign outflows, Indian capital markets saw a glimmer of hope in late March as these overseas investors turned net buyers. This tentative reversal followed cumulative outflows of a staggering ₹1.45 trillion, raising hopes that the worst may be over.

However, analysts remain divided on whether this marks a sustained recovery or a temporary respite. Similar prolonged outflows were seen in July 2022 (14 weeks, ₹1.22 trillion), October 2008 (12 weeks, ₹25,260 crore), and November 2018 (12 weeks, ₹40,164 crore). Over the past 25 years, FPIs have experienced average annual net equity outflows lasting six weeks.

In 90% of these periods, the Nifty index declined by an average of 8%, with corresponding net outflows averaging ₹29,500 crore. “The recent outflow streak was among the longest, driven by geopolitical factors such as China's stimulus package, escalating Russia-Ukraine tensions, and US tariff concerns," notes Feroze Azeez, deputy CEO, Anand Rathi Wealth. However, historical trends indicate that markets have consistently delivered strong returns following a reversal from