Foreign portfolio investors have withdrawn over ₹2.2 lakh crore from Indian equities in 2026, marking the worst selling since foreign portfolio investing in India was permitted in 1993. According to NSE's latest market pulse report, FPI ownership in NSE-listed entities currently stands at 15.8%, falling 90 basis points sequentially to the lowest level in 17 years. The scale of selling represents a dramatic shift in global investor sentiment toward Indian markets, with May 2026 barely half-done showing no signs of the exodus stopping. However, the Nifty50 index excluding FPIs saw marginal ownership increases, indicating that FPIs are primarily exiting crowded, high-liquidity stocks while building positions in broader indices.
The 2026 outflows show a dramatic shape with distinct causes for each month. January opened with ₹35,962 crore in withdrawals, followed by a brief reversal in February when foreign investors turned net buyers, pumping in ₹22,615 crore - the highest monthly inflow in 17 months. However, March delivered the largest monthly outflow ever recorded at ₹1.17 lakh crore, surpassing the previous record of ₹94,017 crore set in October 2024. April saw ₹60,847 crore in outflows, while May 2026 (till May 17) recorded ₹26,304 crore in withdrawals. According to NSE's report, roughly 72% of the $19.7 billion total selling occurred in the last quarter of fiscal year 2026 alone, primarily driven by the West Asia crisis aftermath.
According to NSE's market pulse report, FPIs turned negative on the Industrials sector and maintained underweight positions, while showing less negative sentiment on Consumer Staples and Information Technology. The report reveals that FPIs continued to maintain an overweight stance on Financials, though they slightly reduced this position as of March 2026. The overweight position in communications was retained for the 17th quarter in a row, while FPIs maintained a longstanding underweight position on Materials and neutral stance on Energy. Additionally, FPIs maintained neutral positions on Consumer Discretionary, Healthcare and Utilities. The data shows that FPIs have increasingly added stakes in only single stocks for the past four consecutive quarters from the NIFTY50 index, while consistently reducing their stakes in 10 companies for the past four quarters consecutively.
The primary catalyst for March's record outflow was the sharp escalation of geopolitical tensions in West Asia, which pushed Brent crude above $115 per barrel. As reported by The Financial Express, this represents a significant headwind for India as the country imports over 85% of its crude oil. The conflict in West Asia, rising crude oil prices, and global tariff anxieties were repeatedly cited as key drivers, with Vipin Kumar from Globe Capital confirming that selling in March and April 2026 was exceptional due to Middle East tensions. The latest NSE report confirms that rising bond yields also pulled money from riskier assets to safe bets like US treasury bonds, contributing to the shift away from Indian equities.
Despite historic FPI outflows, domestic institutional investors (DIIs) provided strong support by purchasing equities worth ₹95.8 billion in FY26, nearly five times the scale of FPI outflows. As reported by NSE's market pulse report, the DII ownership in the NSE-listed space stood at 19.6% as of Q4FY26, above the FPI ownership for six consecutive quarters. The last time this occurred was in 2003, after which FPIs flooded the Indian markets and led to a nearly ~70% rally in the coming twelve months. While the headline remains negative, the report highlights that the data signals a reduction in over ownership in Indian equities, while opting for other options in Asia. Market experts suggest that rupee stabilization, crude oil declining toward $90-95 per barrel, meaningful valuation de-rating on Indian equities, and greater clarity on West Asia tensions could be primary conditions for FPI equity flows to change trend.
