Foreign portfolio investors ended a two-month buying streak to become net sellers in Indian equities, withdrawing Rs 7,443 crore during the first week of September. Rebounding crude oil prices, elevated US bond yields and a strengthening dollar dampened risk appetite.
The outflow followed two consecutive months of foreign buying. The FPIs invested more than Rs 29,600 crore in August and around Rs 20,200 crore in July, according to data from the National Securities Depository Ltd. Before this buying streak, foreign investors had remained net sellers for four consecutive months from March to June.
With the latest withdrawal, total FPI outflows from Indian equities so far in 2026 have risen to Rs 2.32 lakh crore, surpassing the Rs 1.66 lakh crore withdrawn during the entire 2025 calendar year.
Extending their selling streak to the debt market, foreign institutional investors withdrew Rs 377 crore through the fully accessible route and Rs 231 crore via the voluntary retention route. These outflows were partially offset by an inflow of Rs 217 crore through the general investment route.
The recent market sell-off was triggered by a surge in crude oil prices, sparking renewed fears regarding India's inflation trajectory and current account balance, according to Rajkumar Rathi, chief investment officer at Yes Securities.
“Further strengthening US bond yields and a firm dollar index have reduced foreign risk appetite for emerging markets,” he said.
Rathi added that India's elevated equity valuations, especially across growth, mid-cap and small-cap sectors, could push foreign investors to lock in profits and rebalance their portfolios.
Despite selling in the secondary market, Rathi said foreign investor appetite for India's primary market remained “structurally resilient”. He said the upcoming IPO pipeline could continue to attract foreign capital if companies price their offerings attractively.
Pabitro Mukherjee, deputy vice president-research at Bajaj Broking, said Brent crude prices, US-Iran geopolitical developments and upcoming US inflation data ahead of the Federal Reserve's mid-September policy meeting would also influence foreign fund flows.
(With PTI inputs)
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