Foreign Portfolio Investors have pulled Rs 44,166 crore from Indian equities so far in the month of October, according to data from the National Securities Depository Ltd. (NSDL). This development comes amid rising crude oil prices, the strengthening of the US dollar, as well as US bond yields that have reached their highest levels since 2002.
The rally of AI stocks have also drawn more attention from foreign capital.
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The latest outflows come after FPIs withdrew Rs 35,861 crore from Indian equities in September. This followed net investments of Rs 20,200 crore in July and Rs 29,631 crore in August, according to data from the National Securities Depository Ltd. (NSDL).
With the latest round of selling, cumulative FPI outflows from Indian equities in 2026 have climbed to Rs 3.04 lakh crore, well above the Rs 1.66 lakh crore withdrawn during the whole of 2025, NSDL data showed.
Vedant Gupte, Co-Founder and CEO of investment platform Trackk, said the recent selloff reflects a broader global reallocation of capital rather than a loss of confidence in India's long-term investment appeal.
"Crude prices staying elevated on Gulf supply risk, a firmer dollar and US yields pulling money back to safer ground, and FPIs chasing the AI rally in North Asian markets where valuations currently look cheaper," Gupte said.
He said the trend does not point to any weakness specific to India, but rather reflects capital flows shifting toward markets with a stronger global macroeconomic backdrop.
"We remain constructive on the medium-term outlook because domestic flows have absorbed this selling without the market cracking, which tells you the floor is sturdier than the headline outflow number suggests," he added.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, said heavy selling by foreign portfolio investors (FPIs) has been the key driver of the Indian market's underperformance in 2026, with the Nifty declining 13.87% so far this year.
From the perspective of foreign investors, withdrawing money from India was rational, given that the risk-free return on 10-year US government bonds was above 5.2%, he said.
"So, as long as the US bond yields remain elevated, FPIs will continue to sell. The scenario will change when the valuations become attractive, and the risk-reward ratio turns favourable for investment," the analyst added.
He added that the market has remained on a downward trajectory over the past two months, with persistently high crude oil prices and elevated US Treasury yields acting as key drags on sentiment.
Meanwhile, foreign investors continued to pare their exposure to Indian debt in September. They pulled out Rs 1,921 crore from securities under the Fully Accessible Route (FAR) and Rs 233 crore through the Voluntary Retention Route (VRR), although this was partly offset by investments of Rs 4,729 crore via the general route.
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"The massive FPI selling is the primary reason why the Indian market is underperforming this year with negative 13.87% Nifty returns YTD in 2026. From the FPI perspective FPI s pulling money out of India is rational since the risk-free return from the 10-year US bonds is above 5.2%. So long as the US bond yields remain elevated, FPIs will continue to sell. The scenario will change when the valuations become attractive and the risk-reward ratio turns favourable for investment," Vijaykumar said.
"During the last two moths the market has been steadily trending down. Elevated crude prices and high US bond yields are the two strong headwinds for the market now. So long as these headwinds remain strong the market will remain under pressure," he added.
(With PTI Inputs)
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