Foreign Portfolio Investors have continued their significant withdrawal from Indian equities, pulling out Rs 14,231 crore in May alone, as persistent global macroeconomic uncertainties and inflation concerns dampen sentiment towards emerging markets.
Illustration: Dominic Xavier/Rediff
Key Points
- Foreign Portfolio Investors (FPIs) have withdrawn Rs 14,231 crore from Indian equities in May, bringing the total outflow for 2026 to over Rs 2 lakh crore.
- The sustained selling is primarily attributed to global macroeconomic uncertainties, including concerns over inflation, interest rates, and geopolitical risks.
- Elevated crude oil prices and West Asian geopolitical tensions are keeping inflation concerns alive, leading investors to reassess expectations of near-term rate cuts by central banks.
- Despite overall selling, FPIs have shown selective investment in sectors like power, construction, and capital goods, with a growing preference for mid-cap and select small-cap stocks.
- Currency depreciation and concerns over India’s earnings growth are also contributing factors, with markets like South Korea and Taiwan attracting FPI flows due to the artificial intelligence boom.
Foreign investors continued to pare their exposure to Indian equities, withdrawing Rs 14,231 crore so far this month driven by persistent global macroeconomic uncertainties.
With this, the total outflow of Foreign Portfolio Investors (FPIs) from the equity market has crossed Rs 2 lakh crore in 2026, which is higher than the Rs 1.66 lakh crore pulled out during the entire 2025, according to data with the NSDL.
Persistent Global Uncertainties Drive Outflows
FPIs were net sellers in all months of 2026, except February.
They withdrew Rs 35,962 crore in January before turning net buyers in February, when they invested Rs 22,615 crore, the highest monthly inflow in 17 months.
However, the trend reversed in March, when foreign investors pulled out a record Rs 1.17 lakh crore.
The selling continued in April with net outflow of Rs 60,847 crore and extended into May with withdrawal of Rs 14,231 crore so far.
“The selling was largely driven by persistent global macroeconomic uncertainties, particularly concerns around inflation, interest rates and geopolitical risks, which continued to weigh on sentiment toward emerging markets,” Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, said.
Impact of Inflation and Geopolitical Risks
He said uncertainty over the global interest rate trajectory remained a key factor influencing flows.
Elevated crude oil prices and lingering geopolitical tensions, especially in West Asia, have kept inflation concerns alive globally, prompting investors to reassess expectations of near-term rate cuts by major central banks.
As a result, global bond yields remained relatively firm, enhancing the attractiveness of developed-market fixed income assets and reducing risk appetite for emerging market equities, he added.
Srivastava also noted that the Indian rupee remained under intermittent pressure, impacting dollar-adjusted returns for foreign investors.
Selective Investments and Emerging Market Trends
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said that despite the overall selling, FPIs have been selectively investing in sectors such as power, construction and capital goods.
Another major trend is their increasing preference for mid-cap and select small-cap stocks with strong growth potential and healthy earnings performance, he said.
According to Vijayakumar, currency depreciation and concerns over earnings growth in India have been key factors driving FPI outflows this year.
He added that stronger earnings growth expected in markets such as South Korea and Taiwan, supported by the artificial intelligence boom, is attracting FPI flows to these markets.
