FPI Equity Outflows Hit ₹49,340 Crore in June Amid Global Volatility

Foreign Portfolio Investors (FPIs) continued their relentless exit from Indian equities in June, pulling out ₹49,340 crore ($5.16 billion). This persistent selling pressure has significantly altered the landscape for Dalal Street, as cumulative outflows for 2026 have already surged to ₹2.7 lakh crore.

A Year of Massive Withdrawals

The scale of foreign capital flight in 2026 has been unprecedented. According to data from the Central Depository Services (India) Ltd (CDSL), the ₹2.7 lakh crore withdrawn so far this year has already surpassed the entire ₹1.66 lakh crore pulled out during the full 2025 calendar year.

The month-on-month trend reveals a volatile pattern of sentiment. After a massive withdrawal of ₹35,962 crore in January, February saw a brief reprieve where FPIs emerged as buyers with ₹22,615 crore—the strongest inflow in 17 months. However, this recovery was short-lived. March witnessed a historic reversal with record offloading of ₹1.17 lakh crore, followed by steady outflows in April (₹60,847 crore), May (₹32,963 crore), and the recent ₹49,340 crore in June.

Drivers of the Equity Sell-Off

Market experts point toward a combination of domestic valuations and global macroeconomic shifts. Himanshu Srivastava of Morningstar Investment Research India noted that the June outflows were fueled by global risk aversion, a preference for developed markets, rising US yields, and growing concerns regarding the high valuations of Indian equities.

While geopolitical tensions eased in the latter half of June due to positive developments regarding a US-Iran peace deal—which helped lower crude oil prices—the relief came too late to stem the initial wave of selling. Additionally, V K Vijayakumar of Geojit Investments highlighted that profit-booking was exacerbated by high volatility in South Korean and Taiwanese markets, even as the rupee showed signs of stabilization against the US dollar.

Debt Market Resilience and Policy Intervention

Interestingly, the exodus is not uniform across all asset classes. While equity markets faced heavy selling, the debt market saw significant interest. FPIs remained net buyers in debt securities, investing ₹21,652 crore through the Fully Accessible Route (FAR) and an additional ₹3,246 crore through the voluntary retention route during June.

To counter the equity outflows and attract more foreign capital, policymakers introduced several strategic measures in June. These include the RBI absorbing hedging costs on FCNR deposits, expanding the forex swap window, widening access to government securities via the FAR, and raising investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCI) in domestic equities.

Key Takeaways

  • Unprecedented Outflows: Cumulative FPI equity outflows in 2026 have reached ₹2.7 lakh crore, already exceeding the total withdrawals of the entire previous year.
  • Valuation & Yield Concerns: Selling was primarily driven by high Indian equity valuations, rising US yields, and a shift in investor preference toward developed markets.
  • Debt Market Divergence: Despite the equity slump, foreign investors showed confidence in Indian debt, injecting over ₹24,000 crore through various specialized routes.