FPIs extended their selling spree in the Indian stock market in October, withdrawing another ₹31,282 crore in just five trading sessions. This came on top of the ₹35,857 crore worth of selling in September, according to NSDL data.
The severe selling by overseas investors came amid rising inflationary pressures, driven by escalating tensions in the Middle East, while the bond market sell-off showed no signs of slowing, with US Treasuries hovering near multi-decade highs.
Domestic factors also turned unfavourable, with poor monsoon rains linked to El Niño compounding price pressures in Asia’s third-largest economy. The RBI was the latest central bank to raise interest rates, joining the US Federal Reserve, Bank of Japan, and European Central Bank in the fight against rising price pressures.
Higher crude oil prices were among the major reasons behind the increased pressure on Indian equities. For India, higher oil prices are particularly uncomfortable because they simultaneously raise the import bill, inflation risks, and pressure on the currency.
Brent continued to remain above $100 per barrel, while recent media reports showed that the White House had asked the Pentagon to draw up strike options against Iran that could be executed before the midterm elections. US President Donald Trump also said on Wednesday that he no longer wanted a deal with Iran.
Meanwhile, higher Treasury yields, along with a rising US dollar, are also influencing FPI sentiment. The yield on the 10-year US Treasury hit a 24-year high of 5.36% on Wednesday and remained close to that level today, hovering around 5.35%. The 30-year Treasury bond yield also remained around a 24-year high.
Investors are demanding greater compensation to hold bonds amid concerns about inflation, government spending, and surging corporate borrowing to finance the artificial-intelligence buildout. The minutes released on Wednesday from the US Federal Reserve’s most recent meeting showed that most Fed officials expect another interest rate hike this year.
₹2.91 lakh crore FPI outflows put Nifty on course for worst year since 2008
With the October outflows so far, total FPI withdrawals from Indian equities in 2026 have reached ₹2.91 lakh crore, surpassing the ₹1.66 lakh crore outflow recorded during the whole of 2025.
The reversal in their sentiment towards Asia’s third-largest economy weighed on the market’s performance, as the Nifty closed each of the last eight weeks lower, marking its biggest weekly losing streak in 25 years.
The losing run has widened the Nifty 50’s year-to-date losses to 15%, positioning it for its biggest annual decline since 2011, when it crashed 24.62%. If not for the support from the domestic mutual funds, the fall would have been even more severe.
What could change the trend?
Gaurav Garg, Head of Research at Lemonn, said FPIs continued to sell in October. He said the pressure is being driven largely by external factors, including elevated crude prices, a weaker rupee, firm US bond yields, and a shift in global allocations towards AI-led markets in North Asia.
Garg said strong domestic SIP flows are cushioning the impact, but volatility could persist as long as crude and US yields remain elevated. A moderation in these pressures, alongside an improvement in corporate earnings and greater currency stability, could help revive foreign flows, he added.
For now, Garg said investors may need to remain selective rather than chase short-term rallies.
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