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Foreign portfolio investors (FPIs) remained sellers in Indian equities in May, pulling out Rs. 32,963 crore and taking their total withdrawals for 2026 to Rs. 2.25 lakh crore, according to data from the National Securities Depository Limited (NSDL).
The scale of the outflow is significant. In just five months, foreign investors have withdrawn more money than they did in the whole of 2025, when net outflows stood at Rs. 1.66 lakh crore.
The selling has been relentless this year. FPIs withdrew Rs. 35,962 crore in January before turning net buyers in February, investing Rs. 22,615 crore. That buying proved short-lived. March saw a massive outflow of Rs. 1.17 lakh crore, followed by another Rs. 60,847 crore in April.
The pace slowed in May, but foreign funds continued to cut exposure to Indian stocks. Market experts said overseas investors are not exiting India for a single event. A combination of domestic and global factors has kept sentiment weak.
Corporate earnings have been one area of concern. Several companies have reported slower profit growth than investors had expected, making valuations look less attractive.
The rupee's weakness has added to the pressure. A falling currency reduces returns for foreign investors when investments are converted back into dollars. At the same time, global funds have found better opportunities elsewhere.
Markets such as the United States, Japan, South Korea and Taiwan have attracted strong inflows, helped by continued investor interest in technology and artificial intelligence-related stocks. Fund managers have shifted money towards those markets in search of higher returns.
Higher crude prices have also affected investors' sentiments. Concerns about tension in West Asia and the disruption of major transportation channels have led to higher crude prices.
In India, where crude is imported in large volumes, higher prices mean higher import bills, increased inflation rates, and a widening current account deficit. These variables may impact the inflow of foreign investments as they directly affect growth and stability.
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The measured flow of investments in May comes as a welcome change after the strong outflows witnessed in March and April. Nevertheless, analysts don’t view the development as an indication of the strong return of foreign portfolio investors (FPIs). The majority of analysts expect a continued sporadic FPI flow for some time to come.
The factors that may help bring FPIs back into India’s stock market include an improved earnings cycle, stability in the value of the Indian rupee, and overall improvement in the global economic environment.
