Foreign Portfolio Investors (FPIs) continued their trend of net selling in Indian equities for the third consecutive month in May 2026, recording net outflows of ₹32,963 crore, according to the National Securities Depository Limited (NSDL).
Despite the ongoing selling, there were indications of easing towards the end of the month. Data from NSDL during the week ending May 29 presented a mixed scenario. On May 25, FPIs faced a net outflow of ₹6,176.80 crore across all segments. However, net inflows of ₹2,564.20 crore were noted on May 26, signaling a reversal of the trend. This was followed by net outflows of ₹1,330.07 crore on May 27, but the final trading day of May reported a modest net inflow of ₹502.06 crore, hinting at a potential stabilization.
In the equities market, the week concluded positively, with net equity investment reaching ₹1,505.22 crore on May 29. This followed a net equity outflow of ₹1,029.89 crore on May 27 and inflows of ₹2,194.68 crore the previous day. Notably, May 25 recorded the largest single-day equity outflow of the week at ₹5,259.31 crore.
In contrast, debt markets exhibited sustained caution. In the Debt-VRR segment, FPIs were net sellers in all four sessions, with the most significant outflow occurring on May 29 at ₹976.41 crore. Conversely, the Debt-FAR segment saw net inflows in three out of the four sessions, totaling ₹180.54 crore on May 25, ₹224.91 crore on May 26, and ₹99.22 crore on May 29, while experiencing an outflow of ₹360.35 crore on May 27.
Cumulatively, FPI selling has been substantial throughout 2026. NSDL data indicates that FPIs sold equities valued at ₹60,847 crore in April and ₹1,17,775 crore in March—the highest monthly outflow this year. This pattern was briefly interrupted in February with net inflows of ₹22,615 crore, while January recorded outflows of ₹35,962 crore. Total net FPI outflows from Indian equities in 2026 now amount to ₹2,24,932 crore, with ₹15,497 crore coming through the primary market route.
Prashant Shah, Co-founder and CEO of Definedge Securities, noted that Indian benchmark indices experienced a sharp correction, with the Nifty and Sensex falling nearly 8–10 percent from their early 2026 highs by the end of May. Between January and April 2026, FPIs withdrew nearly ₹1.8–2 lakh crore from Indian equities, exceeding total outflows recorded during the entire year of 2025. Although bond flows remained negative, the decline was less severe compared to equities.
Analysts have attributed the persistent selling to a mix of geopolitical and macroeconomic pressures. Pabitro Mukherjee, Deputy Vice President – Technical at Bajaj Broking, stated that escalating geopolitical tensions in West Asia have contributed to increased global uncertainty and risk aversion. He added that macroeconomic challenges such as a weakening Indian Rupee and rising crude oil prices further compounded the situation.
The rupee’s path has been a particular concern. Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, remarked that the rupee, which started the year around ₹90 to a dollar, had depreciated to 96.96 recently, but had since somewhat recovered to approximately ₹95 by May 29, supported by a decline in Brent crude prices.
In the broader context, global capital flows towards AI-driven markets have diverted investments from India, with Vijayakumar highlighting poor earnings growth domestically compared to countries like the US, Japan, South Korea, and Taiwan, which have experienced superior earnings growth linked to strong AI-related trades.
Conversely, Domestic Institutional Investors (DIIs) have acted as a counterbalance, injecting ₹826.68 billion in May, which helped absorb ₹559.63 billion in FPI outflows. Mukherjee noted that DIIs maintained a consistent buying streak throughout the month.
FII ownership in Indian equities has fallen to a 14-year low of 14.7 percent, while DII ownership has increased significantly to 18.9 percent, Shah emphasized.
Looking forward, market participants anticipate that the outlook will depend on several factors. Mukherjee foresees that institutional flows in the coming month will remain sensitive to developments surrounding US–Iran tensions, oil price trends, the Reserve Bank of India’s monetary policy decisions, and the progress of the monsoons. Vijayakumar added that concerns regarding valuations of AI-related stocks may shift interest, leading to a decline in FPI flows in that sector and possibly rekindling FPI interest in India.
Published on May 30, 2026.
