FPI outflows cross ₹2 lakh crore in 2026: key drivers

A record outflow milestone in early 2026

Foreign portfolio investors (FPIs) have taken net outflows from Indian equities beyond the ₹2 lakh crore mark for the first time, according to data cited from Sebi and NSDL. A JM Financial report also showed that this wave of selling has pushed aggregate foreign holding in Indian stocks to a 14-year low of 14.7%. The fall in foreign ownership stands out against domestic institutional ownership, which the same report placed at 18.9%. The scale of the move is significant because FPIs have been permitted to invest in Indian stocks since 1993, and the current year’s outflow is described as the worst yearly number since then.

What the data shows up to May 8

In a little over four months until May 8, FPIs have net sold nearly ₹2.1 lakh crore of Indian equities. More than half of this selling was concentrated in March, when risk-off sentiment rose sharply. In April, the pace slowed, with net selling of ₹60,847 crore. For comparison, the total outflow from equities in the whole of 2025 was ₹1.7 lakh crore, underscoring how front-loaded 2026 has been.

March selling wave and the macro triggers

March saw one of the most intense phases of foreign selling, with a reported withdrawal of ₹88,000 crore during the month in one data cut. Another data point put the March outflow at ₹88,180 crore (about $1.6 billion) as of March 20, with FPIs remaining net sellers on every trading day in that period. The selling followed escalating geopolitical tensions in West Asia and a weakening rupee. One account in the provided material noted the rupee fell below the 95-per-dollar level during the period, a level described there as the then-lowest against the dollar.

Why global capital shifted away from India

Multiple drivers were cited for the sell-off. Higher US Treasury yields were highlighted as a key factor, making dollar-denominated assets more attractive and pulling money away from emerging markets such as India. Elevated crude oil prices were also flagged for their potential impact on India’s economic growth and corporate earnings, adding to investor caution. Separately, reports said global money was rotating towards AI-linked sectors, safer US assets, and cheaper Asian markets, creating another layer of pressure on India allocations.

Which sectors felt the most pressure

Sectoral data in the material pointed to financial services as a key area of selling. FPIs were reported to have offloaded financial services shares worth ₹31,831 crore during the fortnight ended March 15. This matters because financials have a high weight in major indices and tend to influence broader market sentiment and liquidity.

Domestic support: DIIs and SIP flows

Despite the record outflows, the market’s resilience was attributed to domestic participation. Domestic institutional investors (DIIs) were reported to have absorbed much of the selling pressure. SIP inflows were also cited as holding steady at around ₹28,000 crore to ₹30,000 crore a month during the phase, helping provide consistent demand even as FPIs sold.

Timeline: from October 2024 to the 2026 peak

The first major wave of foreign selling was reported to have begun in October 2024. Importantly, the current monthly selling in March 2026, while large, was still described as lower than the record monthly exodus of ₹94,017 crore seen in October 2024. The trend was said to have continued through 2025 and intensified sharply in early 2026, culminating in outflows crossing ₹2 lakh crore, or over $10 billion, in the first four months of the year.

Offshore India fund flows also turned negative

A separate set of data points in the material showed a broader cooling of foreign sentiment via offshore products as well. Morningstar’s Offshore Fund Spy for September 2025 reported India-focused active offshore funds saw $1.7 billion in outflows year-to-date, while ETFs saw $171 million in withdrawals. The same snapshot described a reversal from 2024, when offshore India funds and ETFs together attracted $13.4 billion, and noted a sharp sentiment swing of nearly $17 billion in just one year.

Key figures at a glance

Why this matters for Indian equities

The data points to a structural contrast between foreign and domestic participation. On one hand, the drop in foreign ownership to 14.7% signals reduced incremental foreign risk appetite at a time when global yields and geopolitics are in focus. On the other, steady DII buying and SIP inflows indicate that domestic flows have become a larger stabilising force during foreign selling episodes. For investors, the episode also highlights how quickly global macro shifts, such as US rate expectations and crude prices, can transmit into India through FPI flows.

What to watch next

The next cues will likely come from the same variables cited as drivers of the sell-off: the trajectory of West Asia tensions, the rupee’s movement, crude oil prices, and US bond yields. Market participants will also track whether the pace of FPI selling remains closer to April’s slower run-rate, or returns to March-like intensity, and how consistently domestic flows continue to counterbalance foreign selling.