FPIs Exit Indian Equities: June Withdrawals Hit Rs 49,340 Crore

Foreign Portfolio Investors (FPIs) continued their streak of selling in the Indian equity markets through June, marking a significant period of capital flight. While the equity segment faced heavy outflows, a contrasting trend emerged in the debt market, revealing a complex shift in global investor sentiment toward Indian assets.

The month of June saw a massive withdrawal of Rs 49,340 crore ($5.16 billion) from Indian equities. This persistent selling has pushed the cumulative FPI outflows for 2026 to a staggering Rs 2.7 lakh crore, according to data from the Central Depository Services (India) Ltd. To put this in perspective, the current year's outflows have already surpassed the total amount withdrawn during the entire 2025 calendar year, which stood at Rs 1.66 lakh crore.

The trend of selling has been largely consistent throughout the year, with February being the only exception when FPIs briefly returned as buyers with investments of Rs 22,615 crore. However, the momentum shifted violently in March, which recorded a historic equity offloading of Rs 1.17 lakh crore, followed by steady outflows in April (Rs 60,847 crore), May (Rs 32,963 crore), and June.

Global Volatility and Valuation Concerns Drive the Exit

Market analysts point to a combination of macro-economic and geopolitical factors for this exodus. Himanshu Srivastava of Morningstar Investment Research India noted that the June sell-off was driven 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—specifically regarding the US and Iran—eased in the latter half of June, helping to stabilize crude oil prices, the relief came too late to prevent the massive early-month withdrawals. Additionally, V K Vijayakumar of Geojit Investments highlighted that profit-booking was intensified by high volatility in South Korean and Taiwanese markets, even as the rupee showed signs of stabilization against the dollar.

Debt Market Resilience and Policy Interventions

Despite the turbulence in the stock market, the debt market provided a crucial cushion. FPIs remained net buyers in debt securities, investing Rs 21,652 crore through the Fully Accessible Route (FAR) and an additional Rs 3,246 crore through the voluntary retention route during June.

In response to the sustained equity outflows, Indian policymakers introduced several measures to bolster foreign investment. These strategic moves included:

  • The RBI absorbing hedging costs on FCNR deposits.
  • Expanding the forex swap window.
  • Widening access to government securities via the FAR route.
  • Increasing investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCI) in domestic equities.

Key Takeaways

  • Unprecedented Outflows: Cumulative FPI equity outflows for 2026 have reached Rs 2.7 lakh crore, already exceeding the total outflows of the entire 2025 calendar year.
  • Dual Market Sentiment: While equity markets faced a June withdrawal of Rs 49,340 crore, the debt market saw significant inflows totaling over Rs 24,000 crore.
  • Drivers of Exit: The sell-off was primarily fueled by high US yields, Indian equity valuation concerns, and global risk aversion, despite recent easing in geopolitical tensions.