FPIs should return to Indian equities this year: Here's why
What's the story
Foreign Portfolio Investors (FPIs) are likely to return to Indian equities in 2026, after a tough year in 2025. Market strategists believe that the conditions which led to unprecedented outflows last year are now improving. Factors like earnings visibility, valuations, and macroeconomic stability are becoming more favorable for foreign investment.
Market withdrawal
FPIs withdrew record $17.5B from Indian equities in 2025
Antique Stock Broking Limited's report, "India Equity Strategy 2026," revealed that FPIs withdrew a record $17.5 billion from Indian equities in 2025. This was the highest annual outflow in absolute terms. The withdrawal was due to a weak earnings momentum, global risk aversion, and better opportunities in the AI-heavy markets.
Economic outlook
India's macroeconomic factors look favorable for FPIs
The report also said that corporate earnings are likely to see a sharp re-acceleration. Nifty earnings are expected to grow at around 16% CAGR between FY26 and FY28, compared to about 7% in the last two years. India's macroeconomic factors such as real GDP growth of about 7.5%, benign inflation, and current account deficit below 1% of GDP also look favorable for FPIs.
Investment risk
AI exposure gap could pose risk
The report also highlighted a potential risk for FPIs: the gap in India's exposure to artificial intelligence (AI). Global investors are increasingly investing in markets and firms with direct AI exposure, such as semiconductors, advanced hardware, cloud infrastructure, and AI-native platforms. However, India remains largely an AI user rather than a producer at scale. This disparity could widen sectoral divergence within markets.