Foreign portfolio investors (FPIs) stepped up selling in Indian equities in January, pulling out Rs 22,530 crore between January 1 and 16, NSDL data showed. The withdrawals extend a selling streak that began in 2025 and continue to test foreign risk appetite for India.
At the same time, domestic institutional investors (DIIs) offered strong support, recording net equity purchases of Rs 34,076 crore in the same period. The gap underlines how local money continues to absorb foreign exits even as global factors turn less favorable.
NSDL data indicated that FPIs withdrew Rs 22,530 crore from equities in the first half of January. This fresh FPI outflow from Indian equities comes after a significant retreat in the previous year.
In 2025, FPIs sold about Rs 1.66 lakh crore of Indian shares. That exit coincided with volatile currency moves, global trade tensions, concern over possible US tariffs, and worries about stretched Indian market valuations.
Market participants note that FPI selling in January continues the same broader pattern. Foreign portfolio investors in India appear more cautious toward emerging markets as global conditions change, even while domestic flows remain resilient.
Analysts point to global rates as a key driver of the latest withdrawals. Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, told PTI that rising US bond yields and a stronger US dollar have improved risk-adjusted returns in developed markets. He said this has prompted capital to move away from emerging markets.
Himanshu Srivastava, Principal-Manager Research at Morningstar Investment Research India, shared a similar view. He said elevated US yields and dollar strength have made US assets relatively more attractive to global investors.
Srivastava also noted that geopolitical and trade-related uncertainties continue to weigh on emerging market risk appetite. Those concerns add another layer to decisions on FPI allocations, especially when currency and policy risks look harder to price.
According to V K Vijayakumar, chief investment strategist at Geojit Investments, uncertainty around the US-India trade agreement has further dampened sentiment. That uncertainty can matter for investors watching possible tariff or regulatory shifts that may affect earnings and valuations.
Currency moves remain central to the foreign portfolio investors’ calculus. The rupee weakened by nearly 5% in 2025, and it has recently traded around 90.44 per US dollar. This depreciation cuts into dollar returns even when Indian stock indices hold near previous levels.
Onshore, foreign investors also face questions about Indian equity valuations. The information provided noted relatively rich valuations in some market segments. Alongside that, mixed cues from the ongoing earnings season have encouraged FPIs to book profits and rebalance portfolios.
However, domestic institutional investors buying has helped offset overseas selling. DIIs purchased Rs 34,076 crore in equities between January 1 and 16. Their steady inflows continue to provide a buffer for the market, even as foreign money leaves.
Vijayakumar said the selling trend could continue until clear positive triggers emerge to support a sustained rally. He also pointed out that the AI-led stock market trade that drove performance in 2025 remains in place in early 2026, though he suggested a reversal in that theme could appear later in the year.
The recent FPI outflow from Indian equities highlights how sensitive cross-border flows remain to rising US bond yields, a strong dollar, rupee moves, and trade policy signals. At the same time, firm DII activity and ongoing interest in AI-related themes continue to underpin the domestic market.