Foreign portfolio investors (FPIs) raised their bearish positions on Indian equity index futures to a record last week, signalling persisting uncertainty in stocks. According to data from the National Stock Exchange (NSE), FPIs increased their net cumulative short position on Nifty and Bank Nifty futures to 290,041 contracts on Thursday before trimming them to 288,428 contracts a day later. This represents a significant escalation in their bearish stance on Indian equities amid challenging market conditions.
The latest data reveals that FPIs withdrew ₹20,974 crore from Indian equities through September 18, 2026, marking a sharp reversal from their net buying positions of ₹20,200 crore in July and ₹29,630 crore in August. As per PTI news report, this brings the total outflow for 2026 to ₹2.45 lakh crore, surpassing last year's entire outflow of ₹1.66 lakh crore. The reversal has been driven by ongoing global uncertainties, higher US interest rates, and elevated crude oil prices, with Brent crude prices staying above $100 per barrel for the better half of September. According to Business Standard, the rupee has also come under significant pressure, declining 1.1% in the previous week, its sharpest weekly fall in four months, trading at a record low of 95.92-95.96 per US dollar and breaching the 96-mark intraday.
Despite the renewed selling in secondary markets, foreign investors continue to show interest in India's primary market, with FPI investment through the primary market standing at ₹2,703 crore up to September 19. This has taken total FPI investment through the primary market this year to ₹48,550 crore, partly explaining why the IPO market has remained active despite weak sentiment in listed equities. As per ETMarkets, large public issues, anchor books and fresh listings continue to attract foreign capital, while the broader cash market faces pressure. Month-to-date, FIIs have sold ₹7,041 crore against DII buying of ₹36,219 crore, with domestic institutional investors providing crucial support to limit market falls.
Foreign investors also extended their selling to the debt market during September, withdrawing ₹10,296 crore through the Fully Accessible Route (FAR), ₹1,817 crore via the Voluntary Retention Route (VRR) and ₹1,068 crore through the general route. According to Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth, the latest selling by FPIs is attributed to three key factors -- higher US interest rates and yields, elevated crude oil prices amid geopolitical tensions, and weakness in the Indian rupee. The Federal Reserve has raised rates to 3.75-4.00 per cent, with the narrowing yield differential between India and the US reducing the relative attractiveness of Indian assets. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that elevated crude prices and the high US bond yields (US 10-year yield at 5 per cent) are negatives for the Indian equity market and FPI flows, while the resilient Indian economy and expectations of better earnings growth remain positives.
According to Vedant Gupte, Co-Founder and CEO of Trackk, "September's FPI selling is a crude-and-dollar story, not an India story. When oil spikes and US yields firm up, money leaves every emerging market and India isn't being singled out; it's being caught in the tide." Going forward, FPI flows will be significantly influenced by the ongoing Iran-US conflict and the consequent impact on crude prices. The positive side remains that India's economy remains resilient and earnings growth is expected to improve, with these factors still supportive for Indian equities despite the current challenging environment. As per Choice Wealth, the trend of FPI investment through the primary market has been continuing in September, suggesting that while foreign investors remain cautious on secondary markets, they continue to find value in India's primary market opportunities.
