FPIs Withdraw ₹32,963 Cr in May; 2026 Outflows Hit ₹2.25 Lakh Cr

Foreign Portfolio Investors (FPIs) have continued their significant withdrawal from Indian equities, with May 2026 witnessing a net outflow of ₹32,963 crore. This recent selling pressure has pushed the cumulative FPI outflows for the year 2026 to a staggering ₹2.25 lakh crore (₹2.25 trillion), according to data from the National Securities Depository Limited (NSDL) and corroborated by various financial news outlets. This figure has already surpassed the total outflow of ₹1.66 lakh crore recorded during the entire calendar year 2025, highlighting an accelerating trend of foreign capital exiting the Indian market. The month of May marked the third consecutive month of net selling by FPIs in 2026, although the pace of selling reportedly moderated compared to the preceding months. The year began with substantial withdrawals, as FPIs pulled out ₹35,962 crore in January. A brief respite was observed in February, which saw net inflows of ₹22,615 crore, representing the highest monthly inflow in 17 months. However, this positive trend was short-lived, as March witnessed a record outflow of ₹1.17 lakh crore. The selling continued into April with net outflows of ₹60,847 crore, leading up to the May figures. Several key factors are contributing to this sustained exodus of foreign capital from Indian equities. A significant reason cited by market experts is the relatively subdued earnings growth in India when compared to the stronger corporate performance seen in developed markets such as the US, Japan, South Korea, and Taiwan. The persistent depreciation of the Indian rupee has also played a crucial role. The rupee has weakened by nearly 6% against the US dollar so far in 2026 and approximately 10% over the past year, dropping from the mid-80s to around 95.5. This depreciation erodes dollar-denominated returns for foreign investors, making Indian assets less appealing. Furthermore, more attractive investment opportunities in other global markets are diverting capital away from India. Notably, the robust, artificial intelligence-led rallies in countries like South Korea and Taiwan have drawn significant foreign capital. Elevated global interest rates and a stronger US dollar, coupled with high US bond yields, are making developed markets and fixed-income assets relatively more attractive, prompting investors to adopt a more defensive stance globally. Geopolitical tensions, particularly in West Asia, have also contributed to the cautious sentiment. These tensions have pushed Brent crude oil prices above the USD 100 per barrel mark, raising concerns about India's substantial crude import bill and its potential impact on inflation and the current account deficit. India's heavy reliance on crude oil imports, sourcing over 80% of its requirements from overseas, makes it particularly vulnerable to such global price fluctuations. Global concerns regarding the trajectory of inflation and uncertainty surrounding the timing and pace of interest rate cuts by major central banks further influence capital allocation decisions worldwide. The implications of these FPI outflows are multifaceted. They exert considerable pressure on the Indian rupee, contributing to its weakening trend, and also contribute to a widening current account deficit. The share of FPI ownership in Indian equities has fallen to a nearly 14-year low, reaching 14.7% in April 2026, down from almost 20% a decade ago. However, the Indian market has shown some resilience due to strong buying by Domestic Institutional Investors (DIIs). DIIs have actively stepped in as net buyers, partially cushioning the impact of the foreign selling. In fact, DIIs now hold a larger share of Indian equities, at 18.9%, surpassing FPIs. Despite the short-term challenges, market experts largely maintain that India's long-term growth narrative remains robust, supported by strong economic fundamentals and increasing retail participation. Nevertheless, FPI flows are expected to remain sensitive to global macroeconomic and geopolitical developments in the near term. A potential reversal in this trend could be triggered by clearer signals on global interest rate cycles, de-escalation of geopolitical tensions, and overall stabilization in international financial markets. Moneycontrol.com, the source of the article, is a prominent financial news portal in India. While some assessments indicate a 'Right-Center' bias and 'Mixed factual reporting' for general content due to its pro-business tone and government ties, its reporting of market data, particularly FPI figures, is generally considered accurate and is widely corroborated by other reputable Indian financial news organizations.

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