FPIs Have Pulled ₹2.2 Lakh Crore From India in 2026. When Does the Bleeding Stop?

Foreign portfolio investors have been relentless sellers of Indian equities through 2026, and the scale of the exit is now approaching numbers that were once considered full-year extremes.

According to NSDL data as of May 15, FPIs have pulled out nearly ₹2.2 trillion from Indian equities so far in 2026, reflecting the cautious stance of overseas investors toward domestic markets. To put that in context, this compares with ₹2.4 lakh crore of outflows across the entire year of 2025 and ₹1.29 lakh crore in 2024 — highlighting how quickly capital has exited Indian equities this year.

The reasons behind this sustained exit are layered. FII outflows of over ₹2 lakh crore in early 2026 are primarily driven by a risk-off sentiment triggered by West Asia tensions pushing crude oil above $100, record-low rupee depreciation hitting 96 against the US Dollar, and elevated US bond yields, according to market experts.

Currency erosion has compounded the pain for foreign investors. Money market experts say that the rupee's slide from 85 to 96 against the dollar since January 2025 has weakened the equity case for foreign investors by eroding dollar returns — a flat Nifty over the same period translates into a significant loss for a foreign investor once currency depreciation is factored in.

A rotation away from India toward AI-boom markets has also played a role. Among Asian peers, Taiwan's stock market has surged nearly 40% in dollar terms so far in 2026, while South Korea's Kospi has rallied 62%, Japan's Nikkei has gained 18%, and China's Shanghai Composite is up 7%. In contrast, India's benchmark indices have declined.

The silver lining, if there is one, is that domestic investors have absorbed most of the blow. During Q1 of calendar year 2026, DIIs invested $27.2 billion in equities supported by steady SIP inflows, absorbing nearly 90% of foreign outflows. FII ownership is now at a two-decade low, falling below DII ownership for the first time in recent history. Experts cited in market reports believe incremental FII selling may be approaching exhaustion, with a potential reversal expected in the second half of 2026 if crude stabilises and the rupee finds a floor.