Foreign Portfolio Investors (FPIs) continued to exit Indian equities in May, pulling out Rs 32,963 crore amid concerns over earnings growth, weakening rupee and better opportunities in overseas markets.Data from the NSDL showed that cumulative FPI outflows from Indian equities have now reached Rs 2.25 lakh crore in 2026. The figure has already surpassed the Rs 1.66 lakh crore withdrawn during the whole of 2025.Foreign investors remained net sellers through most of the year, with February being the only exception. After withdrawing Rs 35,962 crore in January, FPIs turned net buyers in February, investing Rs 22,615 crore, marking the strongest monthly inflow in 17 months.The buying, however, was short-lived. March saw a record outflow of Rs 1.17 lakh crore, followed by net withdrawals of Rs 60,847 crore in April. The selling trend continued in May, with outflows of nearly Rs 33,000 crore.Market experts attributed the sustained selling to a combination of domestic and global factors, although they noted that the intensity of outflows has eased in recent months.Geojit Investments Chief Investment Strategist V K Vijayakumar said weaker earnings growth in India compared with stronger corporate performance in several global markets has influenced investor behaviour.“The strong artificial intelligence-led rally in markets such as South Korea and Taiwan has also attracted foreign capital away from India,” Vijayakumar said.According to Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, the depreciation of the rupee has also played a major role in driving foreign investor withdrawals.“The rupee has weakened nearly 6% so far in 2026 and around 10% 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 also pointed to India’s dependence on imported crude oil as a growing concern. He noted that the country imports more than 80% of its crude oil requirements and that Brent crude prices have risen sharply from around USD 70 per barrel to between $95 and $105 amid disruptions around the Strait of Hormuz. According to him, this has increased 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.Despite the continued outflows, analysts observed that the pace of selling slowed in May compared with earlier months.Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, said the moderation indicates that foreign investors are becoming less aggressive in cutting their exposure to Indian equities.“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.Looking ahead, Jasuja said a turnaround in FPI flows is unlikely in the near future unless there is a significant improvement in macroeconomic conditions.
What is the primary reason for the recent exit of Foreign Portfolio Investors from Indian equities?
