Foreign investors pull out ₹1.8L cr in FY26, worst-ever outflow
What's the story
Foreign portfolio investors (FPIs) pulled out a record ₹1.17 lakh crore in March 2026, the highest monthly outflow ever. The trend continued throughout FY26, with FPIs selling Indian equities worth ₹1.8 lakh crore, the highest annual outflow ever recorded in a financial year. The massive overseas selling comes amid the ongoing US-Iran war that began on February 28 and one of the most volatile phases for Indian markets in recent years.
Market volatility
Rupee hits record low against US dollar
The Indian rupee has also witnessed its worst slide in 14 years, losing 4% in about four weeks. This has raised concerns over imported inflation, current account pressures, and the overall macro outlook for India. For foreign investors, Indian risk assets in FY26 were hit by a perfect storm of factors: the Iran conflict, uncertainty over global tariffs, high market valuations, an AI-led tech sector downturn, and nearly a 10% fall of rupee against the US dollar.
Persistent pressure
Second consecutive year of FPI outflows
The latest financial year marks the second consecutive year of FPI outflows, highlighting the persistent pressure on foreign sentiment toward Indian equities. In the previous fiscal year as well, FPIs had withdrawn ₹1.24 lakh crore. The impact on Indian equities was also evident with Nifty 50 and Sensex declining 5.1% and 7.1%, respectively, during FY26.
Market analysis
Geopolitical tensions and macro concerns driving FPI outflows
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, attributed the heavy FPI selling to geopolitical stress, rupee weakness, and fears over India's macro outlook. He noted that the global equity market weakness post-West Asia war, steady rupee depreciation, fears of remittance decline from Gulf countries and high crude prices impacting India's growth and corporate earnings contributed to sustained selling by FPIs.
Future outlook
Reversal in foreign investor sentiment remains uncertain
The key question for Dalal Street now is whether April can mark the beginning of a reversal in foreign investor sentiment after a bruising financial year. Analysts believe any recovery in flows will depend less on optimism alone and more on whether global risks actually begin to ease. Vijayakumar said India's relatively weak returns compared with developed and emerging markets over the last 18 months have also contributed to FPI outflows.
Investor sentiment
Turnaround in flows unlikely to happen overnight, say experts
Akshat Garg, Head - Research & Product at Choice Wealth, also believes that while a turnaround in flows is possible, it is unlikely to happen overnight. He said FPIs have been on the back foot lately with sharp outflows from Indian equities and bonds as the war pushed oil prices higher, revived inflation concerns, and put pressure on rupee.