With about three months still to go in the year, FPI outflows have already surpassed the $19 billion withdrawn in 2025, according to Bloomberg data. The selling has intensified in recent months, with overseas investors offloading $4.1 billion worth of Indian shares in September and nearly $1.5 billion in October so far, including another $500 million in Monday’s trade.
The selling so far this year is equivalent to nearly 1% of India’s $4.9 trillion equity market, the world’s sixth largest. This also marks the third consecutive year of net selling by FPIs, bringing their cumulative net purchases since 2011 to almost zero, Bloomberg data shows.
Yet, the foreign selling has been concentrated in the secondary market. FPIs have bought nearly $6 billion worth of Indian shares through the primary market over the same period, highlighting continued interest in new issuances even as they reduce exposure to listed stocks.
The broader risk-off mood has been driven by a combination of rising US Treasury yields and a strengthening dollar, while a spike in global crude oil prices has further weighed on sentiment. Higher oil prices are viewed as a macroeconomic headwind for India given the country’s dependence on imports, with the increase potentially adding to inflationary pressures while widening the fiscal and current-account deficits and putting further pressure on the currency.
“FDI and FPI inflows are not an exciting story yet. Higher dollar and yields are generally negative for Asian economies,” said Pranjul Bhandari, chief India economist at HSBC. “We are cautious on oil and surging global yields,” she added.
Persistent FPI selling has also contributed to a moderation in Indian equity valuations. The benchmark Nifty 50 has lost more than 19% in dollar terms since the beginning of the year and is currently trading at less than 17 times one-year forward earnings, below its five-year average of 19.5 times, according to Bloomberg data.
Domestic institutional investors (DIIs), including mutual funds and insurance companies, have provided a significant counterweight to the foreign selling. DIIs have bought about $68 billion worth of Indian equities between January and October, absorbing a substantial portion of the FPI outflows during the period.
The sustained foreign selling has also exerted pressure on the rupee. The currency has depreciated nearly 7% against the US dollar so far this year, closing at 96.30 on Monday.
India’s experience, however, is not isolated. Other emerging markets have also witnessed significant foreign outflows. Taiwan has recorded outflows of about $34 billion, while South Korea has seen nearly $127 billion leave its equity market so far this year.
Despite the heavy foreign selling, their benchmark equity indexes have rallied 70% and 78%, respectively, in dollar terms over the same period, underscoring the divergence between foreign flows and market performance across emerging Asia.