Foreign institutional investors have offloaded domestic equities worth ₹2.06 lakh crore in 2026, extending their retreat from Indian markets in May. According to data from NSDL, FPIs have pulled out ₹14,231 crore so far this month, adding to a year marked by persistent selling pressure. The total outflow of ₹2.06 lakh crore in 2026 is significantly higher than the ₹1.66 lakh crore pulled out during the entire 2025, as reported by The Times of India. The pattern through 2026 has largely remained negative, with February standing out as the lone exception when foreign investors briefly reversed course.
The selling pressure has been particularly intense in recent months, with March recording the sharpest reversal with a record ₹1.17 lakh crore exiting Indian equities. April followed with another steep outflow of ₹60,847 crore, while May has continued the same trajectory. January opened with FPIs selling equities worth ₹35,962 crore, before foreign investors briefly reversed course in February, bringing in ₹22,615 crore - their biggest monthly investment in 17 months. However, this momentum did not last, with selling resuming in subsequent months.
According to Himanshu Srivastava, Principal - Manager Research at Morningstar Investment Research India, as reported by The Times of India, the selling was largely driven by persistent global macroeconomic uncertainties, particularly concerns around inflation, interest rates and geopolitical risks, which continued to weigh on sentiment toward emerging markets. He noted that uncertainty over the global interest rate trajectory remained a key factor influencing flows, with elevated crude oil prices and lingering geopolitical tensions, especially in West Asia, keeping inflation concerns alive globally. As a result, global bond yields remained relatively firm, enhancing the attractiveness of developed-market fixed income assets and reducing risk appetite for emerging market equities. Srivastava also highlighted that the Indian rupee remained under intermittent pressure, impacting dollar-adjusted returns for foreign investors.
Despite the overall selling pressure, V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that FPIs have been selectively investing in sectors such as power, construction and capital goods. According to The Times of India, another major trend is their increasing preference for mid-cap and select small-cap stocks with strong growth potential and healthy earnings performance. Vijayakumar attributed currency depreciation and concerns over earnings growth in India as key factors driving FPI outflows this year, while 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.
