FPIs Pull ₹20,974 Crore from Equities in September Amid Global Uncertainty

Foreign Investors Retreat as Global Uncertainties Weigh on Indian Equities

The recent withdrawal by foreign investors highlights the growing caution amid global economic challenges.

FPI Withdrawals Amid Global Economic Concerns

Foreign Portfolio Investors (FPIs) have exhibited a notable shift in sentiment, withdrawing ₹20,974 crore from Indian equities as of September 18. This outflow comes after a brief resurgence in FPI investments during July and August, when they infused ₹20,200 crore and ₹29,630 crore, respectively. The recent withdrawal underscores a growing caution among foreign investors, driven by a confluence of global economic factors.

The cumulative outflow from Indian equities has now reached ₹2.45 trillion in 2026, surpassing the total outflow of ₹1.66 trillion recorded for the entire year of 2025. This trend raises concerns about the sustainability of foreign investments in the Indian market, particularly as global economic conditions remain volatile.

Key Factors Driving FPI Sentiment

Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth, highlights three primary factors contributing to the recent FPI selling: rising US interest rates, elevated crude oil prices, and a weakening Indian rupee. The Federal Reserve’s decision to raise rates to between 3.75% and 4.00% has narrowed the yield differential between Indian and US assets, diminishing the relative attractiveness of Indian equities.

Additionally, Brent crude prices have remained elevated, consistently exceeding $100 per barrel, exacerbated by geopolitical tensions in West Asia. This situation raises concerns about inflation and India’s import costs, further deterring foreign investors. The Indian rupee has also faced pressure, recently trading at a record low of 95.92-95.96 per US dollar, marking its sharpest weekly decline in four months.

Broader Market Implications

The current trend of FPI withdrawal is not isolated to India; it reflects a broader pattern affecting emerging markets. Vedant Gupte, Co-Founder and CEO of Investment platform Trackk, notes that the selling is largely driven by global crude and dollar dynamics rather than specific issues within the Indian economy. As oil prices surge and US yields remain firm, capital flows out of emerging markets, including India.

Looking ahead, the trajectory of FPI flows will be significantly influenced by ongoing geopolitical tensions, particularly the Iran-US conflict, and its impact on crude prices. Analysts, including V K Vijayakumar, Chief Investment Strategist at Geojit Investments, emphasize that while elevated crude prices and high US bond yields pose challenges for the Indian equity market, the resilience of the Indian economy and expectations of improved earnings growth could provide some support.

Debt Market Trends

In addition to equities, FPIs have also extended their selling to the Indian debt market, withdrawing ₹10,296 crore through the Fully Accessible Route (FAR), ₹1,817 crore via the Voluntary Retention Route (VRR), and ₹1,068 crore through the general route. This trend underscores a broader shift in foreign investor sentiment, reflecting concerns over the overall economic landscape.

Key Highlights

• FPIs withdrew ₹20,974 crore from Indian equities in September.
• Cumulative outflows in 2026 have reached ₹2.45 trillion, surpassing 2025’s total outflow.
• Key factors for withdrawal include rising US interest rates, high crude oil prices, and a weakening rupee.
• FPIs also withdrew ₹10,296 crore from the debt market during the same period.
• The Indian rupee recently traded at a record low against the US dollar.

Investor Note: The recent FPI withdrawals signal a cautious outlook among foreign investors, driven by global economic uncertainties. While the Indian economy shows resilience, investors should closely monitor geopolitical developments and their potential impact on market sentiment.