FPI Profile: Foreign investors continue selling in May, withdrawing Rs 32,000 crore

Foreign portfolio investors (FPIs) continued to exit Indian stocks in May, withdrawing Rs 32,963 crore amid concerns over earnings growth, a weak rupee and better opportunities in overseas markets.Data from NSDL showed that cumulative FDI outflows from Indian equities have now reached Rs 2.25 lakh crore in 2026. This figure has already crossed the Rs 1.66 lakh crore withdrawn during the entire year 2025.Foreign investors remained net sellers for most of the year, with February being the only exception. After withdrawing Rs 35,962 crore in January, FIIs turned net buyers in February, investing Rs 22,615 crore, marking the strongest monthly inflow in 17 months.But the purchase did not last long. March saw a record outflow of Rs 1.17 lakh crore, followed by net withdrawals of Rs 60,847 lakh crore in April. The selling trend continued in May, with outflows reaching nearly Rs 33,000 crore.Market experts attributed the ongoing selling to a combination of local and global factors, although they noted that the intensity of outflows had declined in recent months.Weak earnings growth in India compared to the performance of stronger companies in many global markets has impacted investor behaviour, said VK Vijayakumar, chief investment strategist at Geojit Investments.

“The strong AI-led rise in markets like South Korea and Taiwan has also attracted foreign capital away from India,” Vijayakumar said.According to Sachin Jasuja, Head of Equities and Co-Founder at Centricity WealthTech, rupee depreciation has also played a major role in driving withdrawals by foreign investors.“The rupee has weakened by about 6% so far in 2026 and about 10% over the past year, falling from the mid-1980s to about 95.5 to the US dollar despite the RBI’s efforts to defend the currency,” he said.Jasuja also cited India’s dependence on imported crude oil as a growing concern. He pointed out that the country imports more than 80% of its crude oil needs and that Brent crude prices rose sharply from about $70 per barrel to between $95 and $105 amid unrest around the Strait of Hormuz. According to him, this led to an increase in the import bill and the current account deficit.“A weaker rupee directly impacts dollar-denominated returns for foreign investors, making it one of the biggest reasons for continued FDI selling,” he said.Despite continued outflows, analysts noted that the pace of selling slowed in May compared to previous months.The moderation indicates that foreign investors are becoming less aggressive in reducing their exposure to Indian stocks, said Himanshu Srivastava, director and research director, Morningstar Investment Research India.He added: “One of the main reasons behind this trend was the gradual improvement in global risk sentiment. Concerns over global trade tensions, tariff-related developments and growth uncertainties, although still present, have subsided somewhat from the high levels seen a few months ago.”Looking ahead, Jasoga said a shift in foreign portfolio investment inflows is unlikely in the near future unless there is a significant improvement in macroeconomic conditions.