Foreign Portfolio Investors (FPIs) resumed selling Indian equities in September after two consecutive months of net buying. According to data from the National Securities Depository (NSDL), FPIs withdrew ₹7,443 crore from Indian equities between September 1-4, marking a reversal in foreign investor sentiment following the July turnaround. The latest outflow follows FPI investments of more than ₹29,600 crore in August and around ₹20,200 crore in July, as reported by ET Now. Prior to this, foreign investors had remained net sellers for four consecutive months from March through June, with cumulative outflows reaching ₹2.32 lakh crore so far in 2026, already exceeding the ₹1.66 lakh crore withdrawn during the whole of 2025.
Benchmark indices faced strong selling pressure last week as Brent crude surged to $109.97/bbl on Friday and sustained above $102/bbl, a July-high level, amid heightened geopolitical uncertainty. As reported by ET Now, the Nifty closed lower for the fifth week in a row, starting the week on a negative note and dragging lower as the week progressed to form an intraweek low of 23,231 in Friday's session. However, buying demand at lower levels saw the index closing the week at 23,398.1 levels, down by 2.1%. The Bank Nifty also witnessed selling pressure and closed the week down by 1.3%, while the broader market also witnessed profit booking with the Nifty Midcap and Smallcap indices closing lower by 1.4% and 0.9% respectively.
According to Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, FIIs stayed on the sell side for a third consecutive week during last week, offloading ₹56.1 billion worth of Indian equities, while DIIs extended their buying streak with net purchases of ₹231.6 billion. As reported by ET Now, FIIs ended the week as net sellers for the fourth consecutive week, offloading ₹17.95 billion, with four of the five sessions closing in the red. DIIs stayed on the buy side, extending their streak with accumulation of ₹64.19 billion, though this was a sharp step down from the ₹231.56 billion deployed the previous week. The support was not enough to arrest the slide, with the index falling even on Friday when DII buying peaked at ₹19.68 billion against the week's largest FII sale of ₹9.31 billion.
Rajkumar Rathi, Chief Investment Officer at YES Securities, attributed the recent selling to the rebound in crude oil prices, which has raised concerns about India's inflation and current account outlook. He said rising US bond yields and a stronger dollar had further reduced foreign investors' appetite for emerging markets. Rathi also pointed to India's relatively high equity valuations, particularly in growth-oriented sectors and the mid- and small-cap segments, which could encourage foreign funds to book profits and rebalance their portfolios. Despite the selling in the secondary market, foreign investor interest in India's primary market remains relatively resilient, according to Rathi. The pipeline of upcoming initial public offerings (IPOs) could continue to attract foreign capital, acting as a separate channel for FPI inflows, with attractive pricing by companies potentially sustaining foreign participation even if secondary-market selling pressure persists.
Foreign investors also remained cautious in India's debt markets during the period. They withdrew ₹377 crore through the Fully Accessible Route (FAR) and ₹231 crore through the Voluntary Retention Route (VRR). However, FPIs invested ₹217 crore through the general route during the period under review, as reported by ET Now. The renewed equity outflows underline the sensitivity of foreign capital flows to global interest rates, currency movements and commodity prices, even as India's primary market continues to attract foreign investor interest.
