Foreign Portfolio Investors (FPIs) have continued their aggressive selling in Indian equities in 2026, intensifying pressure on domestic markets and the rupee amid elevated crude oil prices and rising global risk aversion.
According to NSDL data, FPIs have sold equities worth over ₹2.19 lakh crore through the secondary market so far this year, already surpassing the total outflows recorded in 2025. As of now in 2026, the overall investment through the primary market amounts to ₹12,468 crores.
The sustained capital outflows, coupled with a widening current account deficit, have significantly weakened the rupee, which has slipped from around 90 at the start of the year to beyond the 96 mark against the US dollar, according to experts.
Even as domestic institutional investors (DIIs) continue to absorb selling pressure and now hold a larger share of Indian equities than FPIs, concerns over global capital flight towards AI-driven markets and persistent foreign outflows continue to weigh on sentiment, according to analysts.
According to ICICI Securities, total FPI ownership of Indian equities has decreased to around 15% at present, down from approximately 20% ten years ago. The majority of this decline was initiated following the 2022 Russia-Ukraine conflict and coincided with the bottoming out of major US tech stocks.
A closer analysis of FPI activity reveals an interesting trend: amid a reduction in India’s FPI holdings, the number of stocks in which FPIs have invested over 1% has increased from around 900 to approximately 1,300, according to ICICI Securities’ report.
Are FPIs driving the boom-and-bust cycle?
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, said that FPIs don’t move the market boom and bust cycles.
Vijayakumar explained that the data shows there is no long-term correlation between FPI investments and market movements. However, in the short run, FPI flows can influence the market.
“In particular, sustained FPI selling on a large scale can impact sentiment, too. This is happening now. That’s why the market is weak despite the DII buying eclipsing FPI selling by a wide margin. Also, it is very important to understand that, from the fundamental perspective of valuations and earnings growth, other markets are more attractive,” said Vijayakumar.
Similarly, Sunny Agrawal – Head of Fundamental Research at SBI Securities, added that historically, FPIs have been key drivers of short-term market volatility due to their heightened responsiveness to global macroeconomic developments. In contrast, DIIs – including mutual funds, insurance firms, and pension funds- play a stabilising role by offsetting sharp FPI outflows. This resilience is largely supported by the steady and predictable inflows they receive through retail Systematic Investment Plans (SIPs). These regular contributions ensure a continuous supply of capital, allowing DIIs to remain well-funded even during periods of market turbulence.
“Consequently, when foreign investors exit or sell aggressively, DIIs are able to deploy their ample liquidity to cushion the impact and support market stability. Overall, while FPIs influence short-term movements, the broader market trend over the long term is primarily guided by DII flows, which are aligned with sustained, structural growth objectives,” said Agrawal.
FPI sectoral flows and AUM in April
According to ICICI Securities, FPIs sold equities worth nearly ₹60,900 crore in April 2026. The highest outflows were recorded in the financial sector, where around ₹30,900 crore was sold. This was followed by other discretionary consumption at ₹8,000 crore, healthcare at ₹6,900 crore, energy at ₹6,700 crore, and automobiles at ₹5,500 crore.
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