FPI exodus in four months of 2026 surpasses all of last year

Mumbai: Overseas investors have dumped Indian equities worth over ₹1.8 lakh crore so far in 2026, surpassing the total for all of 2025, as a weaker rupee, elevated oil prices and limited AI investment opportunities in the country fuelled risk-off sentiment.

Selling in local equities – the second highest across Asia and emerging markets after South Korea – is the most by overseas investors in the first four months of any calendar year, show data from ETIG and Bloomberg.

The unabated outflows are an extension of selling by foreign portfolio investors (FPIs) since September 2024, when sentiment on India turned sour after corporate earnings growth failed to match rich share valuations. In 2025, FPIs pulled ₹1.6 lakh crore out of stocks, the highest in a year until then.

“Foreign outflows were driven by a host of factors like weak rupee and deceleration in earnings momentum,” said Sriram Velayudhan, senior vice president, IIFL Capital Services. “South Korea and Taiwan saw increased foreign interest as these offered bets on the AI and semiconductor theme at cheaper valuations.”

Just as it looked like withdrawals were tapering off this year, the West Asia conflict that began February 28 revived the flight to safety, with foreign investors stepping up their selling amid the record fall in the rupee and worries about the impact of higher oil prices on the currency.

Risk-off Sentiment in Asia
“At the end of 2025, the valuations in India were relatively less expensive and in the first two months of 2026, the flows were largely neutral, but the thesis changed quickly in March as global investors sold shares worth around $12 billion in India,” said Hari Shyamsunder, VP and senior client portfolio manager, Franklin Templeton.

The renewed selloff in March struck not just India but also global AI favourites such as Taiwan and South Korea. The intensity of the selling across Asian markets led to South Korea displacing India as the most sold market in the region in 2026 with outflows at $35.3 billion. India was next at $19.75 billion followed by Taiwan at $8.50 billion, according to Bloomberg data. Russia has received the most foreign capital investment at $20.6 billion, followed by Brazil at $11.8 billion.

“The foreign selling was sharper in these markets at about $21-26 billion, which clearly marked the risk-off sentiment as Asia emerged vulnerable due to the West Asia war,” said Shyamsunder.

Selling abated in Taiwan and South Korea in April but India is yet to see renewed inflows in the absence of the AI theme, he said.