Foreign fund outflows: FII began 2026 as sellers; over Rs 7,600 crore offloaded in 2 days
The fresh pullout follows a steep exit in 2025, when FPIs sold Indian equities worth Rs 1.66 lakh crore ($18.9 billion).
That record outflow was driven by sharp currency swings, global trade tensions, worries over possible US tariff actions and concerns that market valuations had run too hot. Foreign selling pressure also weighed on the currency, contributing to rupee’s almost 5% fall against the US dollar over the course of last year. Even so, market participants do not rule out a change in sentiment as 2026 unfolds.
VK Vijayakumar, chief investment strategist at Geojit Investments, told PTI that foreign investors may recalibrate their approach as domestic conditions improve.
Strong economic growth and signs of a recovery in corporate earnings could start drawing overseas capital back into Indian markets, he said. Another analyst, Vaqarjaved Khan, senior fundamental analyst at Angel One, pointed to several potential triggers that could support foreign inflows.
He said that easing friction in India–US trade ties, a favourable global interest rate environment and relative stability in the USD-INR exchange rate could make Indian equities more attractive again.
According to Khan, valuations are now more reassuring compared with last year, reducing one of the key deterrents for FPIs. For now, however, caution remains the dominant theme.
Data from the National Securities Depository Ltd (NSDL) shows that FPIs were net sellers to the tune of nearly Rs 7,608 crore between January 1 and January 2. Market watchers note that early-year caution is not unusual.
Foreign investors have withdrawn money from Indian equities in January in eight of the past ten years, reflecting a tendency to wait for clearer global and domestic signals before taking fresh positions. Going forward, FPI flows are expected to stay linked to global developments and macroeconomic trends.
While valuation concerns have eased to some extent, foreign investors are likely to remain selective, keeping a close watch on economic data and external cues before turning decisively positive.
