Foreign investors withdrew 44,166 crore rupees from the Indian stock market during October. This caused the total fund outflow this year to exceed 3 lakh crore rupees. The decline in investor sentiment was influenced by high crude oil prices, the strengthening of the US dollar, and the rise in US bond yields.
The latest outflow followed a net withdrawal of 35,861 crore rupees in September. Previously, according to NSDL data, Foreign Portfolio Investors (FPIs) invested 20,200 crore rupees in Indian stocks in July and 29,631 crore rupees in August.
Thanks to the recent sales, the withdrawal of FPIs from Indian stocks in 2026 reached 3.04 lakh crore rupees, which is significantly higher than the figure of 1.66 lakh crore rupees registered for the entire year of 2025.
Forecasts and reasons for the outflow
Vedant Ghopte, co-founder and CEO of the investment platform Trackk, believes that this sell-off should be viewed more as a global reallocation of capital rather than an assessment of India's investment prospects. He explained this by stating that 'high crude oil prices due to supply risk in Persian Gulf countries, a stronger dollar, and the flow of money into safer assets due to US yields, as well as FPIs chasing the AI rally in North Asian markets where current valuations look cheaper.'
Ghopte emphasized that these factors do not indicate specific weakness in India but reflect the movement of capital towards markets with a stronger global macroeconomic narrative. He added that 'we maintain a constructive view on the medium term, as domestic flows absorbed this sell-off without a market crash, indicating that the foundation is stronger than suggested by outflow headlines.'
Vee-Kay Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, stated that the mass selling by FPI was the main reason for the underperformance of the Indian market this year, as the Nifty index showed a negative return of 13.87 percent since the beginning of 2026. From the perspective of foreign investors, the withdrawal from India was rational, considering that the risk-free yield on 10-year US government bonds exceeded 5.2 percent.
Vijayakumar noted that 'as long as US bond yields remain high, FPIs will continue to sell. The situation will change when valuations become attractive and the risk-reward ratio becomes favorable for investment.' He also added that the market has been declining for the last two months, with high crude oil prices and high US bond yields being two main obstacles.
Meanwhile, in September, foreign investors also expanded their sales in the debt market. They withdrew 1,921 crore rupees through the Fully Accessible Route (FAR) and 233 crore rupees through the Voluntary Retention Route (VRR), while investing 4,729 crore rupees through the general route.