Foreign investors have continued to reduce their exposure to Indian equities, pulling out Rs 27,048 crore so far this month. This reflects the vigilance of global investors amid the changing global economic and geopolitical environment. With this, the total withdrawal from the equity market by foreign portfolio investors (FPIs) has reached Rs 2.2 lakh crore in 2026, higher than the Rs 1.66 lakh crore withdrawn during the entire 2025, according to NSDL data.
FPIs were net sellers in all months of 2026, except February. They pulled out Rs 35,962 crore in January, before becoming net buyers in February when they infused Rs 22,615 crore—the highest monthly inflow in 17 months. However, this trend reversed in March, when foreign investors withdrew a record Rs 1.17 lakh crore. The selling continued in April too, with a net withdrawal of Rs 60,847 crore, and the trend continued in May too, with a withdrawal of more than Rs 27,000 crore so far.
Why is the sale happening?
Himanshu Srivastava, Principal – Manager Research, Morningstar Investment Research India, said that this latest trend of withdrawals reflects uncertainty over global growth, increasing geopolitical tensions in key regions and volatility in crude oil prices. These factors have kept pressure on the risk appetite of investors towards investing in emerging markets including India. He further said that the strong US dollar and increase in US bond yields have been the main reasons behind this selling activity.
Higher returns in developed markets have increased the attractiveness of safer assets, leading investors to adopt a more defensive stance. Srivastava also said that concerns over the direction of global inflation, and uncertainty over the pace and timing of future interest rate cuts by major central banks, continue to influence capital allocation decisions globally.
Rupee fall and impact of AI
VK Vijayakumar, chief investment strategist at Geojit Investments, said continued selling by FPIs, coupled with a widening current account deficit, has put pressure on the rupee. He said that at the beginning of the year, the rupee was at 90 against the US dollar. On May 15, it broke the level of 96 and touched the level of 96.14. Vijayakumar said that if FPI outflows continue and crude oil prices remain high, the rupee may weaken further.
He also said that due to the continuous capital inflow in companies focusing on Artificial Intelligence across the world, some funds have gone elsewhere from markets like India, because these markets are considered lagging behind in the field of AI. He added, “This trend could reverse when the AI trade – which seems like a bubble right now – finally cools down.
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