Foreign portfolio investors have pulled out more than Rs 22,530 crore from Indian equities in the first half of January. This heavy selling continues a trend that began last year, putting sustained pressure on domestic markets.
Historical Context of FPI Withdrawals
Back in 2025, foreign portfolio investors recorded a massive outflow of Rs 1.66 lakh crore from Indian stocks. Multiple factors drove this capital flight, including currency volatility, global trade tensions, potential US tariffs, and high market valuations.
International Factors Influencing Outflows
Market analysts point to several international developments affecting investor behavior. Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, explained the situation clearly.
"Rising US bond yields and a stronger dollar have improved risk-adjusted returns in developed markets," Jasuja told PTI. "This situation prompts capital reallocation away from emerging markets like India."
Himanshu Srivastava, principal-manager research at Morningstar Investment Research India, echoed similar observations. He noted that the appeal of US assets has increased significantly due to elevated bond yields and dollar strength.
Domestic Concerns Adding Pressure
V K Vijayakumar, chief investment strategist at Geojit Investments, highlighted additional factors affecting market sentiment. "The persistent uncertainty over the US-India trade agreement continues to weigh on investor confidence," Vijayakumar stated.
He further explained that rich valuations in certain market segments, combined with mixed signals from the earnings season, have led foreign investors to take profits. Many are rebalancing their portfolios in response to these conditions.
Currency Depreciation Impact
The rupee's depreciation has created additional challenges for dollar-based investors. The Indian currency fell nearly 5% in 2025 and recently touched around 90.44 per dollar. This decline has further diminished returns for foreign investors, adding momentum to the ongoing outflows.
Future Market Outlook
Vijayakumar warned that selling pressure may continue in the near term. "We need clear triggers for a sustained rally to reverse this trend," he cautioned.
The investment strategist also noted interesting market dynamics. AI-driven trading trends that dominated 2025 have persisted into early 2026. However, he suggested that a reversal could potentially emerge later in the year as conditions evolve.
Broader Market Implications
The continued FPI withdrawals reflect broader concerns about emerging markets. Ongoing geopolitical and trade uncertainties are dragging down investor appetite for riskier assets. Market participants are closely watching several developments:
- US monetary policy and bond yield movements
- Dollar strength against global currencies
- Progress on international trade agreements
- Corporate earnings performance in India
- Currency stability in emerging markets
NSDL data confirms the withdrawal pattern between January 1 and 16. The numbers show consistent selling pressure from overseas investors who are reassessing their emerging market exposure.
Market analysts emphasize that both international and domestic factors are influencing these capital movements. The combination of attractive alternatives in developed markets and concerns about Indian market conditions is driving the current trend.
