FPIs pull record Rs 3 lakh crore from Indian equities in 9 months. More pain ahead?

Foreign portfolio investors have pulled out more than ₹3 lakh crore from Indian equities in the first nine months of 2026, surpassing all previous annual outflow records with three months still left in the year. This is the first time outflows from the secondary market have crossed the ₹3 lakh crore mark, underscoring the extent of the risk-off sentiment towards India among overseas investors.

FPIs have sold more than ₹3.05 lakh crore so far in 2026, according to NSDL data, compared with withdrawals of ₹2.4 lakh crore in 2025 and ₹1.21 lakh crore in 2024. Including selling in government bonds under the Fully Accessible Route (FAR), FPIs have pulled out a total of close to ₹3.58 lakh crore from both asset classes.

Rising US bond yields, a stronger dollar and shifting expectations around global interest rates have reduced the relative attractiveness of emerging-market equities, said Gautam Duggad, MD & head of sales, Institutional Equities at Motilal Oswal Financial Services.

"Elevated crude oil prices could also weigh on India's import bill and corporate margins, adding to concerns over earnings," he said. "We do not expect a meaningful turnaround in FPI flows until there is greater clarity or respite on global yields, interest rates, the US dollar, and cooling of crude oil prices."

Their selling has kept the stock market under pressure in 2026, with the Sensex and Nifty down nearly 15.5% and 14%, respectively, in local currency terms. In dollar terms, both benchmarks have fallen more than 20%.

Out of the nine months, they have been sellers in six, as a boom in AI-centric markets like Taiwan and South Korea prompted many investors to reallocate money there. In July and August, FPIs recorded combined inflows of ₹46,180 crore when the upmove in both these markets fizzled out, but they turned sellers again in September seling around ₹33,000 crore amid the simmering West Asia conflict, a spike in US bond yields, a weakening rupee and a revival in appetite for South Korea and Taiwan.

In government bonds, flows surged in June after the government announced measures to attract foreign capital and on expectations that Bloomberg would include Indian bonds in its flagship Global Aggregate Index. With Bloomberg deferring the inclusion, inflows started to taper from mid-July, and they turned sellers subsequently. Cumulative inflows under the FAR in June and July stood at ₹49,355 crore, while there were outflows of ₹11,439 crore in August and September, CCIL data showed.

Shankar Sharma, founder of Gquant and First Global, said the mood among a few FPIs he had recently met was "extremely negative" on India overall, with investors showing interest mainly in select smaller companies. "They will continue selling. That's going to be the pattern. So they will largely keep exiting large caps, and selectively buy small and mid-cap stocks," he said.
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