Foreign Investors Withdraw Over ₹14,000 Crore from Indian Markets in May

Foreign Investment Trends in India

In May, foreign investors have been actively selling off their holdings in Indian markets, with a total withdrawal of ₹14,231 crore, according to NSDL data. This trend is largely attributed to ongoing global economic uncertainties. The cumulative outflow from Foreign Portfolio Investors (FPIs) in the equity market has now surpassed ₹2 trillion in 2026, exceeding the ₹1.66 trillion withdrawn throughout 2025.

FPIs have been net sellers for every month in 2026, with the exception of February. In January alone, they pulled out ₹35,962 crore, but in February, they reversed course, investing ₹22,615 crore, marking the highest monthly inflow in 17 months. Last week, Foreign Institutional Investors (FIIs) continued this trend, selling ₹110.7 billion based on provisional exchange data. Meanwhile, Domestic Institutional Investors (DIIs) stepped in as net buyers, investing ₹213.9 billion during the same period.

Pabitro Mukherjee commented on the sentiment among foreign investors, noting that FIIs began the week positively with a net purchase of ₹28.4 billion following favorable results from state assembly elections. However, escalating geopolitical tensions and fluctuating crude oil prices led to a reversal, resulting in a net sell figure of ₹139.1 billion over the remaining sessions of the week.

He emphasized that geopolitical issues, high oil prices, and a depreciating rupee have contributed to the selling trend among FIIs in recent months, with total offloading reaching ₹2,518.2 billion this calendar year, according to provisional exchange data. Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, stated that the trend of FPI outflows persists this month, with ₹14,232 crore sold through secondary markets by May 8. This brings the total FPI sell figure for 2026 to ₹218,540 crore. However, FPIs continue to invest in specific sectors such as power, construction, and capital goods.

Another notable trend is the preference of FPIs for mid-cap and selectively small-cap stocks that show high growth potential and strong performance. Concerns regarding currency depreciation and earnings growth in India have been significant factors influencing FPI flows out of the country this year. In contrast, impressive earnings growth anticipated in markets like South Korea and Taiwan, driven by the AI boom, is attracting FPI investments into those regions.