Foreign investors have once again turned cautious about Indian stocks. Foreign Portfolio Investors, or FPIs, sold ₹20,974 crore worth of Indian equities in September up to September 18, as per CDSL data. This has made foreign flows a key factor for the Indian stock market once again.
The latest outflow came after two months of fresh foreign buying. FPIs bought Indian equities worth ₹20,200 crore in July. They added another ₹29,630 crore in August. The two months had raised hopes that the long phase of foreign selling could be close to an end.
September has brought a clear change in that trend. Foreign investors have again cut their exposure to Indian shares. Yet, the data does not show a complete exit from India. There is a more complex story behind the latest numbers.
Data from NSDL showed that foreign investors sold ₹23,676 crore through the secondary market up to September 19. The difference between the ₹20,974 crore figure from CDSL and the NSDL figure comes from the different dates and sources used for the data.
A much larger outflow in 2026
The September figure is part of a much bigger trend this year. FPIs have withdrawn about ₹2.45 lakh crore from Indian equities so far in 2026. This is already much higher than the ₹1.66 lakh crore outflow recorded during the full year of 2025.
The year began with foreign investors as net sellers. They sold ₹34,152 crore in January. February brought some relief, as FPIs bought ₹12,950 crore worth of Indian equities.
The situation changed again from March. Foreign investors sold ₹1.15 lakh crore in March. The outflow stood at ₹71,203 crore in April. May saw another ₹50,188 crore leave Indian equities. In June, FPIs sold ₹35,174 crore.
July and August then brought a sharp change. Foreign investors bought ₹20,200 crore and ₹29,630 crore, respectively. That brief period of fresh buying gave the market some hope that foreign demand could return.
The September outflow has now raised fresh questions about whether the July and August purchases were only a short break from a wider period of caution.
Why are foreign investors selling?
Several global factors have put pressure on foreign flows into India. One major factor is the US interest rate environment.
The Federal Reserve has raised rates to 3.75%-4.00%. When US rates and bond yields rise, American assets can offer foreign investors a better return with lower risk than some emerging markets.
This can reduce the appeal of Indian equities. A foreign investor may compare the possible return from an Indian stock with the return available from US bonds. If US yields rise enough, the investor may decide to reduce exposure to riskier markets.
The US 10-year bond yield has also remained close to 5%. This has added to the pressure on foreign flows toward emerging markets such as India.
The issue is not only about Indian stocks. Global investors look at India as part of a much larger world market. When conditions in the US change, capital can move across several countries and asset classes.
Crude oil adds another risk
Oil prices have become another major concern for India. Brent crude has remained above $100 a barrel due to geopolitical tensions in the Middle East.
India imports a large part of its crude oil needs. As a result, a sharp rise in oil prices can increase the country’s import bill. It can also create pressure on inflation and the external balance.
For foreign investors, this can raise concerns about India’s currency and future corporate costs. Higher fuel prices can also affect several parts of the economy, from transport to manufacturing.
This does not mean that high oil prices always lead to foreign selling. However, when expensive oil comes at the same time as high US yields and a weaker rupee, investors may become more cautious.
The rupee is under pressure
The Indian rupee is another important part of the foreign investor story.
The rupee fell 1.1% in the previous week, its sharpest weekly fall in four months. It traded near ₹95.92-₹95.96 against the US dollar and also crossed the ₹96 mark during the day.
Currency movement matters because foreign investors measure their final returns in their own currency. Even if an Indian stock gives a positive return in rupee terms, a fall in the rupee can reduce that return after conversion into dollars.
A weaker rupee can therefore make Indian assets less attractive to overseas investors, especially when US assets also offer higher yields.
India has not lost all foreign interest
One important detail makes the current situation different from a simple India exit story.
Foreign investors are still putting money into India’s primary market. Up to September 19, FPI investment through the primary market stood at ₹2,703 crore. This took total FPI investment through India’s primary market to ₹48,550 crore in 2026.
This shows that foreign investors have not stopped looking at India. They are still willing to take part in IPOs, QIPs, block deals and other new opportunities.
The difference is that investors appear more selective. They may sell some existing shares while still putting fresh capital into companies or sectors that they find attractive.
That makes the current trend more complex than a simple withdrawal of foreign money from India.
Financial stocks see heavy selling
Foreign selling has not affected every sector in the same way. Financial services have faced the biggest foreign outflow.
In the first half of September, FPIs sold ₹6,204 crore worth of financial services stocks. Auto and auto components saw an outflow of ₹2,670 crore.
Power stocks faced foreign selling worth ₹1,653 crore. Telecom recorded an outflow of ₹991 crore, while information technology saw ₹960 crore leave the sector.
Healthcare was different. Foreign investors bought ₹2,114 crore worth of healthcare stocks in the first half of September.
This difference across sectors shows that foreign investors are not simply selling everything in the Indian market. Their choices depend on the sector, valuation, expected earnings and wider global conditions.
Domestic investors offer support
One reason the Indian market can absorb large foreign outflows is the strength of domestic investors.
Domestic Institutional Investors, or DIIs, have become an important source of demand for Indian shares. Mutual funds, insurance companies and other domestic institutions can buy stocks even when foreign investors sell.
For the week ended September 19, FPIs sold ₹7,620 crore, while DIIs bought ₹11,232 crore, as per data cited by Bajaj Broking.
This domestic demand can reduce the effect of foreign selling on the wider market. It also means that the Indian stock market is not fully dependent on foreign capital for liquidity.
The rise of domestic mutual fund flows has become an important change in India’s market structure. It gives Indian stocks a stronger local source of support during periods of global uncertainty.
What could decide the next move?
The next phase of foreign flows will depend on several factors. Crude oil prices will remain important because higher oil costs can put pressure on India’s external position and inflation.
US bond yields will also matter. If US yields remain high, global investors may continue to compare Indian equities with US fixed-income assets.
The rupee will be another key factor. A sharp fall in the currency can make foreign investors more cautious about Indian assets.
Geopolitical risks will also remain important. The Iran-US conflict and its effect on crude oil prices are factors that markets will watch closely.
At the same time, India’s domestic economy remains an important part of the story. Strong domestic demand and better corporate earnings can help Indian companies even when global markets face pressure.
Is foreign money really leaving India?
The data gives a mixed answer.
Yes, foreign investors are once again net sellers of Indian equities in September. The ₹20,974 crore outflow through September 18 is substantial, and the ₹23,676 crore figure through September 19 from NSDL shows the scale of the pressure.
But it would be too simple to say that foreign investors have abandoned India.
The continued flow of capital into the primary market tells us that overseas investors still see opportunities in India. Their current approach appears more selective, with greater attention to valuations, sectors and global risks.
The wider picture is therefore one of caution rather than a complete foreign exit.
For the Indian stock market, the key question now is whether September marks another short period of foreign selling or the start of a longer phase of lower foreign exposure.
The answer will depend on oil prices, US yields, the rupee, global risk and the performance of Indian companies. For now, foreign money is clearly under pressure, but India’s strong domestic investor base and continued primary-market interest provide an important counterbalance.
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