Foreign investors have continued to scale back their exposure to Indian equities, pulling out Rs 27,048 crore so far in May, underscoring a cautious stance amid an evolving global macroeconomic and geopolitical landscape.
The latest withdrawals have pushed total Foreign Portfolio Investor (FPI) outflows from Indian equity markets to approximately Rs 2.2 lakh crore in 2026, already surpassing the Rs 1.66 lakh crore recorded for the entirety of 2025, according to data from the National Securities Depository Limited (NSDL).
Market participants note that FPIs have remained net sellers through every month of the current calendar year, signalling persistent risk aversion among global investors. The sustained selling trend is being driven by a combination of factors, including elevated global interest rates, a stronger US dollar, and ongoing geopolitical tensions that have prompted a shift towards safer asset classes.
Analysts suggest that while India’s long-term growth story remains intact, near-term capital flows are being influenced more by external cues than domestic fundamentals. Rising bond yields in developed markets have made fixed-income instruments relatively more attractive, leading to capital reallocation away from emerging markets such as India.
Additionally, concerns around inflation trajectories in major economies and uncertainty over the pace of monetary policy easing by central banks have further dampened investor appetite for riskier assets. This has resulted in intermittent volatility in Indian equity benchmarks, even as domestic institutional investors have stepped in to provide some stability.
Despite the ongoing outflows, experts maintain that India continues to be a structurally attractive market, supported by robust economic growth, improving corporate earnings visibility, and strong retail participation. However, they caution that FPI flows are likely to remain sensitive to global developments in the near term.
Going forward, any clarity on interest rate cycles in advanced economies, easing geopolitical tensions, and stabilisation in global financial markets could play a crucial role in reversing the current trend of foreign capital outflows. |
