Foreign Investors Experience Caution, Withdraw Rs 14,231 Crore from Indian Market in May
Foreign Investors Continue to Withdraw from Indian Equities Amid Global Uncertainties
Foreign investors have been withdrawing from Indian equities, pulling out a total of Rs 2 lakh crore in 2026, a figure that surpasses the Rs 1.66 lakh crore withdrawn in the entire year of 2025, according to data from the National Securities Depository Limited (NSDL).
The outflow of Foreign Portfolio Investors (FPIs) has been persistent, with the exception of February, when they invested a record Rs 22,615 crore, the highest monthly inflow in 17 months. However, the trend reversed in March, with a net outflow of Rs 1.17 lakh crore, followed by a net outflow of Rs 60,847 crore in April and Rs 14,231 crore in May.
The selling by FPIs is largely driven by global macroeconomic uncertainties, particularly concerns around inflation, interest rates, and geopolitical risks, which continue to weigh on sentiment towards emerging markets. The uncertainty over the global interest rate trajectory remains a key factor influencing flows, while elevated crude oil prices and lingering geopolitical tensions have kept inflation concerns alive globally.
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As a result, global bond yields have remained relatively firm, making developed-market fixed income assets more attractive and reducing risk appetite for emerging market equities. The Indian rupee has also remained under intermittent pressure, impacting dollar-adjusted returns for foreign investors.
FPIs have been selectively investing in sectors such as power, construction, and capital goods, and increasing their preference for mid-cap and select small-cap stocks with strong growth potential and healthy earnings performance. Currency depreciation and concerns over earnings growth in India have been key factors driving FPI outflows this year.
In contrast, stronger earnings growth expected in markets such as South Korea and Taiwan, supported by the artificial intelligence boom, is attracting FPI flows to these markets.
Comparison of FPI Outflows
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| Month | 2026 Outflow (Rs crore) | 2025 Outflow (Rs crore) |
|---|---|---|
| January | 35,962 | - |
| February | -22,615 (net inflow) | - |
| March | 117,000 | - |
| April | 60,847 | - |
| May | 14,231 | - |
| Total 2026 | 2,00,000 | 1,66,000 |
Key Figures and Entities
- Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India
- V K Vijayakumar, Chief Investment Strategist at Geojit Investments
Investor Takeaway
Investors should be cautious of global macroeconomic uncertainties and potential outflows from the Indian market.
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