Foreign Institutional Investors Unload ₹2 Lakh Crore Worth of Indian Stocks in 2026, Contributing to Market Volatility.

Foreign Portfolio Investors Intensify Selling in Indian Equities, Weighing on Rupee

Foreign Portfolio Investors (FPIs) have continued their aggressive selling in Indian equities in 2026, placing significant pressure on domestic markets and the rupee amidst rising global risk aversion and elevated crude oil prices. According to data from NSDL, FPIs have sold equities worth over ₹2.19 lakh crore through the secondary market so far this year, surpassing the total outflows recorded in 2025.

The sustained capital outflows, coupled with a widening current account deficit, have significantly weakened the rupee, which has slipped from around 90 at the start of the year to beyond the 96 mark against the US dollar, according to experts. This trend is particularly concerning given the ongoing global capital flight towards AI-driven markets and persistent foreign outflows.

Despite domestic institutional investors (DIIs) continuing to absorb selling pressure and now holding a larger share of Indian equities than FPIs, concerns over global capital flight and persistent foreign outflows continue to weigh on sentiment, according to analysts. In fact, total FPI ownership of Indian equities has decreased to around 15% at present, down from approximately 20% ten years ago, according to ICICI Securities.

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A closer analysis of FPI activity reveals an interesting trend: amid a reduction in India's FPI holdings, the number of stocks in which FPIs have invested over 1% has increased from around 900 to approximately 1,300, according to ICICI Securities' report.

Experts argue that FPIs do not drive the boom-and-bust cycle in the Indian market. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, explains that while FPI flows can influence the market in the short run, there is no long-term correlation between FPI investments and market movements. Vijayakumar notes that sustained FPI selling on a large scale can impact sentiment, which is currently happening, leading to market weakness despite DIIs eclipsing FPI selling by a wide margin.

Sunny Agrawal, Head of Fundamental Research at SBI Securities, adds that historically, FPIs have been key drivers of short-term market volatility due to their heightened responsiveness to global macroeconomic developments. In contrast, DIIs play a stabilizing role by offsetting sharp FPI outflows, thanks to their steady and predictable inflows through retail Systematic Investment Plans (SIPs). These regular contributions ensure a continuous supply of capital, allowing DIIs to remain well-funded even during periods of market turbulence.

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