New Delhi: Foreign investors continued to pare their exposure to Indian equities, withdrawing Rs 32,963 crore in May due to weak earnings growth, rupee depreciation and more attractive opportunities in other markets.
With this, the total outflow by Foreign Portfolio Investors (FPIs) from the equity market has reached Rs 2.25 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.
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 outflows of Rs 60,847 crore and extended into May with withdrawals of nearly Rs 33,000 crore.
FPIs have been selling Indian equities due to a combination of weak earnings growth, rupee depreciation and more attractive opportunities in other markets, market experts said. However, the pace of selling has been moderated.
Geojit Investments Chief Investment Strategist V K Vijayakumar said 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.
“The strong artificial intelligence-led rally in markets such as South Korea and Taiwan has also attracted foreign capital away from India,” Vijayakumar said.
Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, said the persistent depreciation of the rupee has emerged as another key factor behind FPI outflows.
“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,” he said.
Jasuja noted that India’s heavy dependence on crude oil imports has further aggravated concerns. With the country importing more than 80 per cent of its crude requirements, the sharp rise in Brent crude prices from the USD 70 per barrel range to USD 95-105 amid disruptions around the Strait of Hormuz has widened both the import bill and the current account deficit.
“A weaker rupee directly impacts dollar-denominated returns for foreign investors, making it one of the biggest reasons for continued FPI selling,” he said.
The pace of selling has been moderated in May compared to previous months.
Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, said moderation in outflows suggests that foreign investors are becoming less aggressive in reducing their India exposure compared with the heavy selling witnessed earlier in the year.
” One of the key reasons behind this trend has been the gradual improvement in global risk sentiment. Concerns around global trade tensions, tariff-related developments, and growth uncertainties, while still present, have eased somewhat from the elevated levels seen a few months ago,” he added.
On the outlook, Jasuja said a reversal in FPI flows is unlikely in the near term unless there is a significant improvement in macroeconomic conditions.
