Foreign investors have pulled Rs 49,457 crore out of Indian equities in October so far, the third-biggest monthly net selling of 2026, according to NSDL data as of October 19. Over the past 10 months, FIIs have net sold Rs 3.09 lakh crore of Indian stocks. The churn out is likely on the back of a surge in crude oil prices, which held near $108.3 a barrel, as renewed fighting across West Asia heightened concerns over supply disruptions.
Now, if we look at the foreign institutional investors (FIIs), they’re not getting much out of Indian stock markets, compared to what other emerging markets are providing. For example, the Korean benchmark, Kospi, has given a return of more than 31per cent year-to-date; Japan’s Nikkei 225 has surged 27 per cent during the same time frame; the Chinese benchmark index, Shanghai Composite Index, fell 6.6 per cent YTD. Compare it with the Indian benchmark Nifty50, which has declined over 12 per cent YTD.
Not just that, foreign investors have been selling in Indian equity markets due to rising US Bond yields, contracting the spread with India’s G-Sec yield.
Narrowing US and India 10-year yield
The yield on the 10-year US Treasury note rose as much as 5.3 per cent recently, staying at its highest level since 2007 as expectations strengthened that the Federal Reserve would tighten monetary policy further to contain inflation.
The narrowing yield gap is central to the shift. India’s 10-year G-Sec yield is at 7.37 per cent, while the US 10-year climbed to as much as 5.12 per cent. The spread has narrowed to about 225 basis points, from around 500 basis points during the Covid-19 period.
How does it affect Indian markets? US Treasury bonds are considered one of the safest investments in the world. Investors see them as a risk-free rate of return. When Treasury yields rise, investors can earn a higher “risk-free” return.
So, a 5 per cent return from a safe US bond is better than a 10-12 per cent expected return from Indian equities with much higher risk. As the yield gap narrows, some investors shift money from emerging market stocks like India to US Treasuries.
India’s foreign exchange reserves declined by nearly $60 billion in six weeks to $726.027 billion as of October 9, from a record high of $785.706 billion on September 4. The fall was largely attributed to the Reserve Bank of India’s intervention to support the rupee amid rising crude oil prices, higher US yields, and sustained foreign investor outflows.
Sparsh Bansal is the Chief Copy Editor with ET Now Digital. He writes extensively on equity markets, IPO, with a passion for financial markets and a sharp eye to detect patterns, I extensively cover IPOs, stock movements, and investment strategies that shape India’s economic landscape.
He tracks IPO debuts, corporate earnings, and regulatory changes, bringing clarity to complex financial data, which bridges the gap between numbers and hidden patterns behind them.
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Before ET Now Digital, Sparsh worked as a Correspondent with Financial Express. He started his career with Informist Media as a Reporter. He holds a Post Graduate Diploma in Business and Finance Journalism from Asian College Journalism – Bloomberg, and a Bachelor’s degree in Journalism and Mass Communication from the Noida International University.