FPIs Withdraw ₹13,138 Crore from Indian Equities in September Amid Global Uncertainty

Foreign Investors Pull ₹13,138 Crore from Indian Equities as Global Uncertainty Rises

The recent withdrawal of funds by foreign investors highlights the growing concerns over global economic stability and its impact on emerging markets.

Context of the Withdrawals

The outflow of ₹13,138 crore from Indian equities in the first half of September comes as a stark contrast to the net buying trend observed in July and August, where FPIs infused ₹20,200 crore and ₹29,630 crore, respectively. This recent trend of withdrawal has pushed the total outflow for 2026 to ₹2.37 trillion, surpassing the ₹1.66 trillion withdrawn throughout 2025. This shift indicates a growing caution among foreign investors, primarily driven by external factors rather than domestic economic conditions.

Global Factors at Play

Analysts attribute the recent selling to a combination of rising crude oil prices and increasing US bond yields. Brent crude oil prices surged to USD 109.97 per barrel, remaining above USD 102 amid escalating geopolitical tensions. This rise in oil prices is expected to exacerbate inflationary pressures globally, leading to tighter monetary policies. As Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking, noted, the combination of firming US yields and high oil prices is prompting a risk-off sentiment among investors, pushing them away from emerging markets like India.

Implications for Future FPI Flows

Looking ahead, the trajectory of FPI flows will likely be influenced by ongoing geopolitical tensions, particularly the Iran-US conflict, and its impact on crude oil prices. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted that if US 10-year bond yields approach 5%, it could trigger a significant correction in global equity markets. Such a scenario would likely lead FPIs to pivot towards high-yielding bonds, further straining equity markets.

Debt Market Trends

The trend of withdrawal is not limited to equities; FPIs also pulled out ₹1,350 crore from the debt market through the Fully Accessible Route (FAR) and ₹955 crore through the general route. In contrast, they invested a mere ₹29 crore through the Voluntary Retention Route (VRR). This broader withdrawal from both equity and debt markets underscores a cautious approach by foreign investors amid rising global uncertainties.

Key Highlights

• FPIs withdrew ₹13,138 crore from Indian equities in early September.
• Total outflow for 2026 has reached ₹2.37 trillion, surpassing 2025’s total.
• Rising crude oil prices and US bond yields are key drivers of the outflow.
• Foreign investors also withdrew ₹2,305 crore from the debt market during the same period.
• Future FPI flows will be influenced by geopolitical tensions and inflationary pressures.

Investor Note: The recent withdrawal of funds by FPIs signals a cautious sentiment among foreign investors, driven by global economic factors. Investors should monitor geopolitical developments and inflation trends closely, as these will likely shape future investment flows into Indian markets.