Foreign investors withdraw ₹27,000cr from Indian equities in May
What's the story
Foreign Portfolio Investors (FPIs) have continued their trend of withdrawing funds from Indian equities, pulling out ₹27,048 crore in May. The move indicates global investors' caution amid a changing macroeconomic and geopolitical landscape. With this latest withdrawal, FPIs' total outflows from the equity market in 2026 have reached a staggering ₹2.2 lakh crore, higher than the entire 2025 outflow of ₹1.66 lakh crore, data from NSDL showed.
Market trends
Withdrawals began in January
FPIs have been net sellers in every month of 2026, except February. They had withdrawn ₹35,962 crore in January but turned net buyers the following month with an investment of ₹22,615 crore, the highest monthly inflow in 17 months. However, this trend reversed sharply in March when foreign investors pulled out a record ₹1.17 lakh crore from Indian equities.
Investor sentiment
Factors driving foreign investors' selling activity
The trend of selling continued in April with net outflows of ₹60,847 crore and has extended into May with withdrawals of over ₹27,000 crore so far. Himanshu Srivastava from Morningstar Investment Research India said these outflows reflect persistent uncertainty about global growth, heightened geopolitical tensions in major regions, and volatility in crude oil prices. He added that a stronger US dollar and higher US bond yields are key factors driving this selling activity.
Market pressures
Global inflation trajectory concerns, interest rate cuts uncertainty
Srivastava also highlighted concerns over the trajectory of global inflation and uncertainty about the pace and timing of future interest rate cuts by major central banks. These factors continue to shape capital allocation decisions worldwide. Geojit Investments's Chief Investment Strategist, V K Vijayakumar, said sustained FPI selling and a widening current account deficit have put pressure on the Indian rupee.
Market shift
'AI bubble could eventually draw back funds'
Vijayakumar warned that the rupee could weaken further if FPI outflows continue and crude oil prices stay high. He also observed that the continued flow of capital into artificial intelligence-focused companies globally has diverted some funds away from markets like India, which are perceived as lagging in the AI space. "This trend could reverse when the AI trade, which appears to be in bubble territory, eventually cools off," he added.