FPIs Withdraw Nearly Rs 33,000 Crore in May Amid Weaker Rupee Pressures
In May 2026, foreign investors continued to reduce their stakes in Indian equities, withdrawing a substantial Rs 32,963 crore. This outflow can be attributed to multiple factors, including weak earnings growth, the depreciation of the Indian rupee, and the attraction of more lucrative investment opportunities in other markets. Cumulatively, Foreign Portfolio Investors (FPIs) have now pulled out a staggering Rs 2.25 lakh crore from the equity market in 2026 alone, surpassing the total outflow of Rs 1.66 lakh crore recorded for the whole of 2025. FPIs have remained net sellers in every month of 2026 except for February, when they recorded an inflow of Rs 22,615 crore—the highest in over 17 months—highlighting the volatility in investor sentiment.
Market experts have pointed out that India’s subdued earnings growth, when compared to stronger corporate performances in markets like the US, South Korea, and Taiwan, has significantly influenced FPIs to redirect their capital away from India. The unprecedented rally driven by advancements in artificial intelligence has also captured the attention of foreign investors, resulting in further capital flight. Additionally, the rupee’s persistent decline—approximately 6% in 2026 and around 10% over the past year—has compounded investor concerns. With the Indian currency falling from the mid-80s to near 95.5 against the US dollar, the weak rupee poses a direct risk to dollar-denominated returns for foreign investors, thereby exacerbating the outflow trend.
Despite the aforementioned factors, analysts suggest that the pace of selling has moderated in May compared to the earlier months of 2026. Himanshu Srivastava from Morningstar highlighted that this moderation indicates a shift in foreign investors’ approach, moving away from aggressive selling to a more measured strategy amidst improving global risk sentiment. While uncertainties surrounding global trade tensions and economic growth persist, they appear to be easing, potentially contributing to a more favorable investment outlook. However, Sachin Jasuja cautioned that the reversal of FPI flows is unlikely without significant improvements in macroeconomic conditions. As such, the ability of the Indian market to attract foreign investment may hinge on addressing these underlying economic challenges moving forward.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)