After two consecutive months of investing in Indian stocks, foreign investors became net sellers in the first week of September, withdrawing funds amounting to 7,443 crore rupees. This outflow occurred against the backdrop of rising crude oil prices, increasing US bond yields, and a strengthening dollar, which reduced risk appetite.
This withdrawal followed the fact that Foreign Portfolio Investors (FPIs) directed 30,919 crore rupees in August and 20,200 crore rupees in July. Prior to this, they had been net sellers for four consecutive months, from March to June.
Including the latest withdrawal, the total outflow of foreign portfolio investors from Indian stocks reached 2.32 lakh crore rupees in 2026 alone, surpassing the amount of 1.66 lakh crore rupees withdrawn in 2025.
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Rajkumar Rathi, Investment Director at YES Securities, noted that the recent sell-off is due to the recovery in crude oil prices, which raises concerns about inflation and the prospects of India's current account balance. He added that 'the further strengthening of US bond yields and the firm dollar index have reduced foreign appetite for risk in emerging markets.'
Rathi also pointed to high valuations of Indian stocks, especially in growth sectors, as well as in the mid and small-cap segments, as factors prompting foreign funds to book profits and rebalance their portfolios. Nevertheless, he emphasized that foreign investor interest in the Indian primary market remains 'structurally robust.'
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, predicts that global bond yields are likely to remain a key factor in driving FPI flows. Furthermore, Pabitra Mukjerji, Vice President of Research at Bajaj Broking, stated that the movement of foreign funds will also be influenced by Brent crude oil prices, developing geopolitical tensions between the US and Iran, and upcoming US inflation data before the Federal Reserve meeting in mid-September.
Foreign investors also expanded their selling into the debt market. They withdrew 377 crore rupees through the Fully Accessible Route (FAR) and 231 crore rupees through the Voluntary Repurchase Route (VRR), while investing 217 crore rupees through the general route.