Foreign Portfolio Investors have achieved an unprecedented milestone by pulling out more than ₹3.05 lakh crore from Indian equities in the first nine months of 2026, according to NSDL data, marking the first time outflows from the secondary market have crossed the ₹3 lakh crore mark. Including selling in government bonds under the Fully Accessible Route (FAR), FPIs have pulled out a total of close to ₹3.58 lakh crore from both asset classes, surpassing all previous annual outflow records with three months still left in the year. This represents a dramatic escalation from ₹2.4 lakh crore in 2025 and ₹1.21 lakh crore in 2024. The Sensex and Nifty have been down nearly 15.5% and 14% respectively in local currency terms, with both benchmarks falling more than 20% in dollar terms. FPIs have been sellers in six out of the nine months, with the latest September outflows of ₹33,000 crore amid the simmering West Asia conflict, a spike in US bond yields, a weakening rupee and a revival in appetite for South Korea and Taiwan.
Indian markets are experiencing significant pressure from multiple factors, yet the correction has not been uniform across all segments. According to CNBC TV18, the Nifty 50 is down about 13% from its September 2024 high, while mid-caps are down only around 2%. Nilesh Shah, Managing Director of Kotak Mahindra AMC, attributes much of this divergence to earnings growth performance. The Nifty 50 earnings growth was about 3% in FY25, improved to 10% in FY26 and stood at around 12% in the first quarter of FY27. In contrast, mid-cap earnings growth was about 17% in FY25, around 27% in FY26 and more than 35% in the first quarter of FY27. As per Geojit Investments, the Sensex has tumbled over 1,000 points in recent trading, highlighting the current market volatility. The Nifty 50 has remained lower for the last eight straight weeks, with the last similar losing streak occurring 25 years ago, reflecting the deepening pressure on the broader market.
According to Gautam Duggad, MD & head of sales, Institutional Equities at Motilal Oswal Financial Services, rising US bond yields, a stronger dollar and shifting expectations around global interest rates have reduced the relative attractiveness of emerging-market equities. Elevated crude oil prices could also weigh on India's import bill and corporate margins, adding to concerns over earnings. "We do not expect a meaningful turnaround in FPI flows until there is greater clarity or respite on global yields, interest rates, the US dollar, and cooling of crude oil prices," he noted. Shankar Sharma, founder of Gquant and First Global, said the mood among a few FPIs he had recently met was "extremely negative" on India overall, with investors showing interest mainly in select smaller companies. He expects FPIs will continue selling, largely keeping exiting large caps, and selectively buying small and mid-cap stocks.
Despite intense foreign selling pressure, domestic institutional investors remained net buyers on every session of September, accumulating ₹76,030 crore and offsetting foreign outflows. According to Moneycontrol, DIIs bought ₹11,272 crore against the FII outflow of ₹10,148 crore on the final day alone. Market participants note that domestic flows, particularly through SIPs, continue to act as a stabilising force, though they cannot fully neutralise concentrated foreign selling or global shocks. Vipul Bhowar, Executive Director and Head of Equities at Waterfield Advisors, noted that domestic retail SIPs are bringing in about $3 to 3.5 billion a month, providing meaningful support. However, he cautioned that SIPs alone cannot fully bridge the valuation gap or absorb abrupt FII selling and global shocks. The Nifty 50 has remained lower for the last eight straight weeks, with the last similar losing streak occurring 25 years ago, reflecting the deepening pressure on the broader market.
Despite the benchmark indices' decline, Nifty Smallcap 100 has outperformed with a 8.35% gain during the first nine months of calendar year 2026, while Nifty Midcap index declined only 1.9%, significantly outperforming the benchmark. According to Business Standard, out of 1,345 stocks from the BSE Smallcap index, around half (651 stocks) recorded positive returns, with 83 companies' stock price more than doubling, 125 stocks rallying in the range of 50% to 99%, and 205 stocks surging 20% to 49%. Pharmaceuticals, healthcare, metals and capital goods sectors have bucked the trend and outperformed the market, with indices rallying in the range of 13% to 19%. However, IT sector has been the top wealth destructor, with the Nifty IT index plunging 27%, followed by Nifty FMCG index slipping 19%, Nifty Oil & Gas down 13.6%, and Nifty Financials declining 10.7%. Among individual stocks, the top three companies by market capitalisation - Reliance Industries, HDFC Bank and Bharti Airtel - saw their stocks drop in the range of 16% to 27% in 9MCY26, while TCS, Infosys, Hindustan Unilever, Maruti Suzuki India, ITC, Mahindra & Mahindra and HCL Technologies lost between 19% and 37%.
