FPI Outflows Hit ₹35,860 Crore in Indian Equities

Foreign portfolio investors turned net sellers in Indian equities in September, offloading stocks worth ₹35,860 crore. The selling pressure continued into October, with another ₹18,513 crore pulled out in the first two trading sessions of the month, according to data from NSDL.

Outflows accelerate to historic levels

The September sell-off contributed to a massive withdrawal total for 2026. Total FPI outflows from Indian equities this year have reached ₹2.69 lakh crore. This figure has already surpassed the full-year outflow of ₹1.66 lakh crore recorded in 2025. The reversal follows a period of strong inflows in the preceding months.

Domestic market under prolonged pressure

This capital flight has coincided with a severe downturn in the domestic market. The Nifty 50 index closed lower for eight consecutive weeks. This marks its biggest weekly losing streak in 25 years. Year-to-date losses for the index have widened to 14%. This positions the Nifty for its largest annual decline since 2011, when it crashed 24.62%.

Selling extends across asset classes

The FPI retreat was not confined to equities. Investors turned net sellers across several debt segments and hybrid instruments in September. However, they continued to show interest in initial public offerings, indicating a selective approach rather than a wholesale exit from India.

Global headwinds drive capital reallocation

Multiple global factors are driving this capital reallocation. Brent crude oil prices remain elevated above $100 per barrel, raising India's import bill and inflation risks. Concurrently, the US 10-year Treasury yield has risen to 5.34%, its highest level since 2002. This raises the opportunity cost of investing in emerging markets like India.

A stronger US dollar has also weakened the Indian rupee, which was around ₹96.32 on October 1. This reduces the dollar-denominated returns for foreign investors. These conditions are prompting a portfolio rotation into dollar assets and other Asian technology-heavy markets, forcing India to compete harder for incremental foreign capital.

The domestic economic backdrop shows resilience, with India's real GDP growing 7.8 per cent in the first quarter of the 2026-27 fiscal year. All eyes are now on the Reserve Bank of India. Its Monetary Policy Committee met from October 5 to 7, with a policy decision announced on October 7. A Reuters poll showed around 60% of economists expected a 25-basis-point rate hike due to rising inflation, crude prices, and rupee pressure. The RBI’s October 7 policy decision and its subsequent guidance on inflation, liquidity, and the rupee will be key signals to watch for future FPI flows.