Foreign investors have continued their withdrawal from Indian equities, with net outflows reaching Rs 27,048 crore so far this month. The selling spree reflects the cautious stance among global investors amid shifting macroeconomic conditions and ongoing geopolitical uncertainty.
Massive Outflows in 2026
Data from the NSDL shows that Foreign Portfolio Investors (FPIs) have pulled out a total of Rs 2.2 lakh crore from Indian equity markets in 2026 so far. This is already higher than the Rs 1.66 lakh crore withdrawn during the entire 2025. The selling trend has been largely consistent through the year, with FPIs turning net buyers only in February.
In January, FPIs offloaded Rs 35,962 crore. February briefly broke the pattern with inflows of Rs 22,615 crore, the highest monthly investment seen in 17 months. However, the momentum reversed sharply thereafter. March witnessed heavy selling with record outflows of Rs 1.17 lakh crore, followed by Rs 60,847 crore in April. The negative trend has continued into May, with withdrawals already crossing Rs 27,000 crore.
Global Factors Driving the Exodus
Market experts attribute this sustained exit to multiple global factors. Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, told PTI that the outflows reflect continued uncertainty around global growth, elevated geopolitical tensions across regions, and volatility in crude oil prices. These factors have dampened appetite for emerging markets like India.
He added that the strength of the US dollar and high US bond yields have further influenced investor behaviour, making developed markets comparatively more attractive due to higher returns and safer positioning. Srivastava also noted that global concerns around inflation and uncertainty over the timing and pace of interest rate cuts by major central banks are continuing to impact capital allocation decisions.
Impact on the Rupee
Separately, Geojit Investments Chief Investment Strategist V K Vijayakumar said the sustained FPI selling, along with a widening current account deficit, has added pressure on the Indian rupee. “At the beginning of the year, the rupee was at 90 to the US dollar. On May 15, it breached the 96-mark to touch 96.14,” he said.
He further cautioned that the rupee could face additional weakening if foreign outflows persist and crude oil prices remain elevated. Vijayakumar also pointed to a global shift in capital towards artificial intelligence-focused companies, which has resulted in reduced allocations to markets such as India, perceived as lagging in the AI-driven investment cycle. “This trend could reverse when the AI trade, which appears to be in bubble territory, eventually cools off,” he added.
