Significant Decline in Foreign Portfolio Investment in India for 2025-26

The fiscal year 2025-26 has seen a dramatic drop in Foreign Portfolio Investment in India, with net outflows reaching US$ 16.4 billion. This shift contrasts sharply with the previous year's inflows and highlights a concerning trend in overseas investment. Additionally, while Foreign Direct Investment has increased, the current account deficit remains a critical issue. The data indicates a significant decline in the attractiveness of India's equity markets, with investments hitting a 10-year low. This article delves into the implications of these financial trends and their potential impact on the Indian economy.

By Narendra Chaudhary Jun 8, 2026, 20:13 IST

Overview of Foreign Investments

In the fiscal year 2025-26, India experienced a notable net outflow of Foreign Portfolio Investment (FPI), totaling US$ 16.4 billion, a stark contrast to the net inflow of US$ 3.6 billion recorded the previous year, according to the Reserve Bank of India (RBI). Additionally, the country's foreign exchange reserves saw a depletion of US$ 23.6 billion on a Balance of Payments (BoP) basis, compared to a decrease of US$ 5.0 billion in the prior year. Meanwhile, Foreign Direct Investment (FDI) inflows rose significantly to US$ 6.9 billion in 2025-26, up from US$ 1.0 billion in 2024-25.

The current account deficit for India was reported at US$ 25.2 billion, equivalent to 0.6 percent of GDP, for 2025-26, slightly higher than the US$ 22.9 billion deficit (also 0.6 percent of GDP) from the previous fiscal year. Net invisibles receipts increased to US$ 312.0 billion in 2025-26, surpassing the US$ 264.0 billion recorded a year earlier, primarily driven by net services receipts and personal transfers. Furthermore, the RBI indicated that foreign exchange reserves grew by US$ 7.2 billion on a BoP basis in Q4 2026, although this was a decrease from the US$ 8.8 billion increase noted in Q4 2025.

Decline in Overseas Investment

Overseas Investment in Indian Markets at 10-Year Low

Data from the National Securities Depository Ltd reveals that overseas investment in Indian equity markets has plummeted to a 10-year low, reflecting a decline in the appeal of the nation’s $4.9 trillion stock market. As of June 1, the total net investments by foreign portfolio investors in local shares reached Rs 7.3 trillion, marking the lowest level since 2016.