Foreign investors withdrew ₹32,963 crore from Indian markets in May:Reason- weak rupee sluggish earnings growth

The trend of Foreign Portfolio Investors (FPIs) withdrawing money from the Indian stock market continued in the month of May as well. Foreign investors withdrew ₹32,963 crore from the equity market in May. Investors took this step due to sluggish earnings growth of companies, weakening of the rupee, and better opportunities available in global markets. Sell-off of ₹2.25 lakh crore so far in 2026 According to NSDL data, with this latest sell-off, the total FPI sell-off figure in 2026 so far has reached ₹2.25 lakh crore. This figure is significantly higher than the total sell-off of ₹1.66 lakh crore during the entire year 2025. Foreign investors remained net sellers every month except February In 2026, FPIs have consistently sold in the Indian market every month except February. Why are foreign investors shifting from the Indian market? Rupee has weakened by 6% so far in 2026 Sachit Jajua, Founding Partner and Head of Equities at Centricity Wealthtech, said that the continuously falling value of the rupee is the second biggest reason for FPIs exiting. In 2026 so far, the rupee has weakened by about 6% and by about 10% over the entire past year. Despite RBI’s efforts, the rupee has fallen from the mid-80s level (around 85) to the level of 95.5 against the dollar. Due to the weak rupee, foreign investors’ dollar-denominated returns (profits in dollar terms) are directly affected. Rising oil prices and tensions in Hormuz increase concerns According to Sachit Jajua, India imports more than 80% of its crude oil requirements, which has further increased difficulties. Due to ongoing tensions and disruptions around the ‘Strait of Hormuz’, Brent crude prices have jumped from the range of $70 per barrel to $95-105 per barrel. This has increased both India’s import bill and current account deficit. Selling Pace Slowed Down in May, Global Sentiment Improved However, the pace of selling has slowed down somewhat in May compared to previous months. Himanshu Srivastava, Principal-Manager Research at Morningstar Investment Research India, stated that this reduction in outflow indicates that foreign investors are no longer engaging in aggressive selling as they were at the beginning of the year. The main reason for this is the gradual improvement in global risks and sentiment. Global trade tensions, tariff-related developments, and uncertainties regarding growth still persist, but their pressure has reduced somewhat compared to a few months ago. Future Outlook: Low Expectations for Quick Recovery Speaking about the future direction of the market, Sachin Jasuja said that until there is a significant and concrete improvement in the country’s macro-economic conditions (crude oil, rupee, and deficit situation), expectations for any major U-turn (return) in FPI inflows in the short term, i.e., near future, remain low. What are FPIs and why are their actions important? FPI means Foreign Portfolio Investors, which refers to foreign investors, companies or entities that invest in the stock market, bonds or other financial assets of another country. In the Indian stock market, they are also considered ‘hot money’, because they significantly impact market ups and downs. When earnings growth in the country is weak or the currency is falling, they withdraw their money to secure their investment in dollars.