Foreign investors continued to reduce their investments in Indian equities. In May he withdrew Rs 32,963 crore. This was due to weak earnings growth, falling rupee and more attractive opportunities in other markets. According to NSDL data, with this, the total withdrawal of foreign portfolio investors (FPIs) from the equity market in 2026 has reached Rs 2.25 lakh crore. This figure is more than the Rs 1.66 lakh crore withdrawn in the entire year of 2025. Except February, FPIs were net sellers in all other months of 2026.
This is how the sales happened this year
In January they withdrew Rs 35,962 crore, after which they became net buyers in February. In February they invested Rs 22,615 crore, which was the highest monthly investment in the last 17 months. However, this trend changed in March, when foreign investors withdrew a record Rs 1.17 lakh crore. Selling continued in April also and net money of Rs 60,847 crore came out.
This trend continued in May also and about Rs 33,000 crore were withdrawn. Market experts say that FPIs are selling Indian equities because earnings growth is weak, the rupee is falling and there are more attractive opportunities in other markets. However, the pace of selling has now slowed down a bit.
VK Vijayakumar, chief investment strategist at Geojit Investments, said that earnings growth in India is slow, while the performance of companies in markets like America, Japan, South Korea and Taiwan is much better. For this reason, FPIs are investing their money in other countries. Vijayakumar said that the strong growth in markets like South Korea and Taiwan due to Artificial Intelligence (AI) has also attracted foreign capital away from India.
Effect of fall in rupee
Sachin Jasuja, head of equity and founding partner at Centricity Wealthtech, said that the continuous fall of the rupee has also emerged as another major reason for FPIs to withdraw money. He said that the rupee has weakened by about 6 percent so far in 2026, and it has fallen by about 10 percent in the last one year. He said that despite RBI’s efforts to save the rupee, it has fallen from the mid-80s to around 95.5 against the US dollar.
Jasuja said that India’s heavy dependence on crude oil imports has further increased the concerns. The country imports more than 80 percent of its crude oil needs. In such a situation, the sharp rise in Brent crude prices from $ 70 per barrel to $ 95-105 due to blockages around the Strait of Hormuz has increased both the import bill and the current account deficit. He said that the weak rupee directly impacts the dollar returns for foreign investors, which is one of the biggest reasons for the continuous selling by FPIs.
Global risk sentiment improved
In comparison to previous months, the pace of selling has slowed down a bit in May. Himanshu Srivastava, Principal – Manager Research, Morningstar Investment Research India, said that the slowdown in capital outflows shows that foreign investors are no longer as aggressive in reducing their investments in India compared to the huge selloff at the beginning of the year. He further said that one of the main reasons behind this trend is the gradual improvement in global risk sentiment. Concerns related to global trade tensions, tariff developments and uncertainties over growth, which still remain, have moderated from the high levels seen a few months ago. Talking about the future outlook, Jasuja said that there is little possibility of change in FPI flows in the near future, unless there is a major improvement in macroeconomic conditions.
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