Foreign portfolio investors have extended their selling streak from last year by polling out ₹7,608 crore ($ 846 million) from Indian equities in the first two trading sessions of January, according to data from NSDL. In short, it signals that FPIs are playing safe at the start of the year, and the market may remain a bit cautious in the near term.
The withdrawal of funds comes after a record ₹1.66 lakh crore ($18.9 billion) was taken out from equities in 2025. The massive outflow last year was driven by concerns over sharp currency fluctuations, rising global trade tensions, the risk of potential US tariffs, and stretched market valuations.
What does it mean for rupee?
This sustained selling pressure by foreign portfolio investors (FPIs) has significantly contributed to the nearly 5% depreciation of the rupee against the dollar during 2025.
This happens because when foreign investors keep pulling money out, they convert rupees into dollars to take the money back. This increases demand for dollars and reduces demand for rupee.
However, market experts believe this trend may not last and the situation could improve in 2026.
Despite these positive expectations, FPIs have begun 2026 on a cautious note, and according to official data, they withdrew nearly ₹7,608 crore from Indian equities between 1 and 2 January.
Will the situation improve?
VK Vijayakumar, Chief Investment Strategist at Geojit Investments told PTI that 2026 is expected to witness a shift in FPI strategy, with improving domestic fundamentals potentially attracting net foreign inflows.
A robust GDP growth and the prospects of a recovery in corporate earnings bode well for positive FPI flows in the coming months, he added.
Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, mirrored Vijayakumar’s views, as he stated that the normalisation in India-US trade relations, a benign global interest rate environment and stability in the USD-INR pair could create a favourable backdrop for foreign investors.
He additionally noted that equity valuations have become relatively comforting compared to last year, which could further support a revival in inflows.
Is this a normal trend? Experts weigh in
Despite the hefty withdrawals, experts note that the trend is not unusual, as foreign investors have historically remained cautious in January, pulling out funds in eight out of the past ten years.
Meanwhile, FPI flows are likely to remain highly sensitive to global cues and macroeconomic developments. However, concerns about high valuations in the past year appears to have eased for now, offering some room for optimism going ahead, Khan told PTI.
