Foreign portfolio investors (FPIs) are showing caution as we start 2026, pulling out ₹7,608 crore (about $846 million) from Indian stocks in just the first two trading days. This cautious approach follows a tough year in 2025, during which FPIs withdrew a staggering ₹1.66 lakh crore ($18.9 billion) from the market.
Several factors caused last year’s sell-off. Sharp currency movements, rising global trade tensions, and concerns over possible US tariffs kept investors on edge. The high valuations of Indian equities also raised alarms among foreign investors.
The impact on India’s rupee has been significant. The continuous selling contributed to a nearly 5% drop in the rupee against the US dollar last year. When FPIs convert their rupee holdings back into dollars, it raises the demand for dollars and weakens the local currency.
Historically, January has been a cautious month for FPIs. In fact, data shows that they’ve been net sellers in eight out of the last ten years during this month. Early-year outflows are not unusual.
Looking ahead, FPI flows will likely depend on global economic trends, currency stability, and trade developments. While some valuation concerns have lessened from last year, overseas investors are still waiting for clearer signals from both global and domestic economies.
To add more context, a recent survey from the Reserve Bank of India highlights that more than half of respondents believe foreign investment will take time to stabilize. Financial experts suggest that steady GDP growth and improved corporate earnings outlook will play crucial roles in attracting back foreign investors.
In summary, the cautious movements of FPIs at the start of 2026 reflect a broader trend of moderation and careful observation of financial signals, both locally and globally.
For more details, you can read about foreign investment trends in India from the Reserve Bank of India.
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