Foreign Portfolio Investors (FPIs) have continued their selling spree in the Indian equity market, withdrawing nearly Rs 33,000 crore in May 2026. This marks a continuation of the outflow trend driven by a weaker rupee and more attractive opportunities abroad.
The total outflow by FPIs from the equity market has reached Rs 2.25 lakh crore in 2026, surpassing the Rs 1.66 lakh crore withdrawn during the entire 2025, according to NSDL data. FPIs were net sellers in all months of 2026 except February, when they invested Rs 22,615 crore. However, the trend reversed in March with a record outflow of Rs 1.17 lakh crore, followed by Rs 60,847 crore in April.
Market experts attribute the FPI exodus to weak earnings growth in India, rupee depreciation, and more attractive investment opportunities in other markets. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that subdued earnings growth in India compared to stronger corporate performance in the US, Japan, South Korea, and Taiwan has prompted FPIs to shift capital overseas.
“Subdued earnings growth in India, compared with significantly stronger corporate performance in markets such as the US, Japan, South Korea and Taiwan, has prompted FPIs to shift capital overseas.”
V K Vijayakumar, Chief Investment Strategist, Geojit Investments
The depreciation of the rupee, which has weakened nearly 6% in 2026 and around 10% over the past year, is another critical factor. Sachin Jasuja, Head of Equities at Centricity WealthTech, highlighted that the rupee's fall from the mid-80s to about 95.5 against the US dollar has impacted dollar-denominated returns for foreign investors.
Himanshu Srivastava, Principal - Manager Research at Morningstar Investment Research India, observed that the moderation in outflows suggests foreign investors are becoming less aggressive in reducing their India exposure compared to earlier in the year.
“The rupee has weakened nearly 6 per cent so far in 2026 and around 10 per cent over the past year, falling from the mid-80s to about 95.5 against the US dollar despite RBI's efforts to defend the currency.”
Sachin Jasuja, Head of Equities, Centricity WealthTech
Background
The persistent FPI outflows underscore the challenges faced by the Indian market amid global economic shifts. The rupee's depreciation and India's heavy reliance on crude oil imports, which have been exacerbated by rising Brent crude prices, have widened the current account deficit.
Looking ahead, a reversal in FPI flows seems unlikely unless there is a significant improvement in India's macroeconomic conditions. Market participants will be closely monitoring global risk sentiment and domestic economic indicators for any signs of change.
