Foreign portfolio investors pulled out heavily from Indian equities. They withdrew over Rs 22,530 crore between January 1 and 16, 2026. Consequently, the selling streak continues from last year.
Data from NSDL confirms the net outflow in the first fortnight. Meanwhile, domestic institutions stepped in strongly. They bought equities worth Rs 34,076 crore during the same period.
FPIs already exited around Rs 1.66 lakh crore throughout 2025. Global factors drove that massive withdrawal. For instance, volatile currency moves pressured markets. Additionally, trade tensions and fears of US tariffs intensified concerns. Stretched valuations added further strain.
The prolonged foreign selling weakened the rupee noticeably. It depreciated roughly 5% during 2025. Moreover, the currency recently hovered around 90.44 per dollar. Thus, dollar-denominated returns eroded despite stable index levels.
Experts blame rising US bond yields and a stronger dollar. These factors improve returns in developed markets. Therefore, capital flows away from emerging economies like India.
Sachin Jasuja from Centricity WealthTech highlighted the reallocation trend. He noted better risk-adjusted returns in the US prompt the shift. Similarly, Himanshu Srivastava from Morningstar pointed to elevated yields. He added that geopolitical uncertainties dampen risk appetite globally.
Domestic factors also play a role. Rich valuations in some segments trigger profit-taking. Mixed earnings signals encourage portfolio rebalancing too.
VK Vijayakumar from Geojit Investments expects the trend to persist. He says clear positive triggers remain absent for now. However, the AI-led trade that dominated 2025 carries into early 2026. A reversal might appear later this year.
Overall, foreign outflows pressure Indian markets. Domestic support cushions the impact effectively. Still, global headwinds continue to dominate sentiment.
