Image used for representative purpose only. , Photo courtesy: Reuters
Foreign portfolio investors have had a cautious start to 2026, continuing their selling streak from last year by pulling out ₹7,608 crore ($846 million) from Indian equities in the first two trading sessions of January.
The outflow of funds follows the biggest ever outflow of ₹1.66 lakh crore ($18.9 billion) recorded in 2025, driven by volatile currency movements, global trade tensions and concerns over potential US tariffs and inflated market valuations.
Also read Rupee falls 5% in 2025 amid continued foreign fund outflow, dollar strength
This sustained selling pressure from foreign portfolio investors (FPIs) has significantly contributed to around 5% depreciation of the rupee against the dollar during 2025.
However, market experts believe that the situation may change in 2026.
VK Vijayakumar, chief investment strategist at Geojit Investments, said this year is likely to see a change in FPI strategy, as improving domestic fundamentals may start attracting net foreign inflows.
He said prospects of strong GDP growth and improving corporate earnings bode well for positive FPI inflows in the coming months.
Expressing similar views, Wakarjaved Khan, Senior Fundamental Analyst, Angel One, said normalization in India-US trade relations, a benign global interest rate environment and stability in the USD-INR pair could create a favorable backdrop for foreign investors.
He said equity valuations have become relatively comfortable compared to last year, which could support a revival in inflows.
Despite these positive expectations, FPIs have started 2026 with a cautious stance, and they pulled out around ₹7,608 crore from Indian equities between January 1 and 2, according to NSDL data.
This trend is not unusual, as foreign investors have historically been cautious in January, having pulled funds out in eight of the last ten years, Mr Khan said.
As a result, FPI flows are likely to remain highly sensitive to global cues and macroeconomic developments. While high valuations were a major concern last year, the pressure has now eased, leaving some room for optimism going forward, he said.
published – January 04, 2026 11:39 am IST
