Foreign portfolio investors have extended their retreat from Indian equities in May, taking their total withdrawal from the market in 2026 beyond Rs 2 lakh crore as global economic concerns continue to drag down sentiment. Data from NSDL showed FPIs have pulled out Rs 14,231 crore so far this month, adding to a year marked by persistent selling pressure. The cumulative outflow this year has now surpassed the Rs 1.66 lakh crore foreign investors withdrew during the whole of 2025. The pattern through 2026 has largely remained negative, with February standing out as the lone exception. January opened with FPIs selling equities worth Rs 35,962 crore. In February, however, foreign investors briefly reversed course, bringing in Rs 22,615 crore, their biggest monthly investment in 17 months. That momentum did not last. March recorded the sharpest reversal, with a record Rs 1.17 lakh crore exiting Indian equities. April followed with another steep outflow of Rs 60,847 crore, while May has continued the same trajectory. “The selling was largely driven by persistent global macroeconomic uncertainties, particularly concerns around inflation, interest rates and geopolitical risks, which continued to weigh on sentiment toward emerging markets,” Himanshu Srivastava, Principal, Manager Research at Morningstar Investment Research India, said. According to Srivastava, uncertainty over how global interest rates will move remains central to foreign investor behaviour. High crude oil prices and unresolved geopolitical tensions, particularly in the Middle East, have kept inflation concerns elevated worldwide, forcing investors to reassess hopes of near-term rate cuts by major central banks. This backdrop has supported firm global bond yields, increasing the appeal of developed-market debt instruments while weakening investor appetite for emerging market equities such as India. He also said intermittent weakness in the Indian rupee has affected returns for overseas investors when measured in dollar terms. Even amid sustained selling, foreign investors have not completely stepped away from Indian markets. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said FPIs have shown selective interest in segments such as power, construction and capital goods. He noted that mid-cap and certain small-cap stocks with strong earnings and growth potential are also drawing investor attention. Vijayakumar said currency depreciation and concerns around India’s earnings growth have played a significant role in shaping FPI outflows this year. He added that markets like South Korea and Taiwan are currently seeing stronger FPI interest, supported by expectations of better earnings growth linked to the artificial intelligence boom.
