Foreign Portfolio Investors Withdraw Rs 2.25 Lakh Crore from Indian Markets in 2026, Record Rs 32,963 Crore Outflow in May

Foreign Portfolio Investors Continue to Pile Out of Indian Equities

Foreign Portfolio Investors (FPIs) have continued to pare their exposure to Indian equities in May, with net outflows amounting to Rs 32,963 crore. This trend is driven by weak earnings growth, rupee depreciation, and more attractive opportunities in other markets, according to data from the National Securities Depository Limited (NSDL).

The total outflow by FPIs from the equity market has reached Rs 2.25 lakh crore in 2026, surpassing the Rs 1.66 lakh crore withdrawn during the entire 2025. FPIs were net sellers in all months of 2026 except February, when they invested Rs 22,615 crore, the highest monthly inflow in 17 months.

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The financial services sector witnessed the biggest sell-off by FIIs in the first half of May, with stocks worth $1.87 billion sold off. This was followed by a sell-off of $718 million in the oil and consumable fuel sector and $265 million in telecom stocks. In contrast, sectors such as services ($732 million), capital goods ($276 million), and metals and mining ($177 million) saw maximum FPI inflows during this period.

Market experts attribute the continued outflows to a combination of weak earnings growth, rupee depreciation, and more attractive opportunities in other markets. Tensions in West Asia have pushed Brent crude oil prices above the USD 100 per barrel mark, raising concerns over India’s import bill and inflation outlook.

Geojit Investments Chief Investment Strategist V K Vijayakumar notes that subdued earnings growth in India, compared with significantly stronger corporate performance in markets such as the US, Japan, South Korea, and Taiwan, has prompted FPIs to shift capital overseas.

The persistent depreciation of the rupee has also emerged as a key factor behind FPI outflows. Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, notes that India's heavy dependence on crude oil imports has further aggravated concerns. With the country importing more than 80 per cent of its crude requirements, the sharp rise in Brent crude prices from the USD 70 per barrel range to USD 95-105 amid disruptions around the Strait of Hormuz has widened both the import bill and the current account deficit.

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A weaker rupee directly impacts dollar-denominated returns for foreign investors, making it one of the biggest reasons for continued FPI selling, according to Jasuja.

Himanshu Srivastava, Principal - Manager Research at Morningstar Investment Research India, notes that the moderation in outflows suggests foreign investors are becoming less aggressive in reducing their India exposure compared with the heavy selling witnessed earlier in the year.

On the outlook, Jasuja said a reversal in FPI flows is unlikely in the near term unless there is a significant improvement in macroeconomic conditions.