Foreign portfolio investors have turned net sellers again in September, as surging bond yields, elevated crude oil prices and ongoing tensions in the Middle East have triggered aggressive selling. In September, they sold stocks worth ₹35,860 crore, with the selling continuing into October, as foreign investors pulled out another ₹18,513 crore from equities in just two trading sessions, according to data from NSDL.
The outflows came after FPIs invested ₹20,200 crore in Indian equities in July and ₹29,630 crore in August. With the September outflows, total FPI withdrawals from Indian equities in 2026 have reached ₹2.69 lakh crore, surpassing the ₹1.66 lakh crore outflow recorded during the whole of 2025.
The reversal in their sentiment towards Asia's third-largest economy weighed on the market's performance, as the Nifty closed each of the last eight weeks lower, its biggest weekly losing streak in 25 years. The losing run has widened the Nifty 50's year-to-date losses to 14%, positioning it for its biggest annual decline since 2011, when it crashed 24.62%.
In addition to equities, FPIs also turned into net sellers in debt (general limit) at ₹5,247 crore, debt (VRR or Voluntary Retention Route) at ₹5,049 crore, debt (FAR or Fully Accessible Route) at ₹10,431 crore, and hybrid at ₹2,078 crore. Although the selling activity in equities accelerated, FPIs continue to pour funds into IPOs, as they invested ₹8,551 crore in the primary market.
Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth, said, “This secondary-market selling versus primary-market buying suggests that foreign investors are not simply switching off India; they are becoming much more selective about where they deploy capital, a trend likely to continue into October.”Oil, US yields and rupee weigh on FPI flows Dheeraj Gaur said it’s the same geopolitical-economic issues for India.
The same three major variables that continue to dominate the conversation: oil, US yields and the rupee – an unpleasant cocktail for foreign investors. Crude prices have remained elevated (Brent-$100+) amid continuing geopolitical tensions and concerns around supply through the Middle East.
For India, higher oil is particularly uncomfortable because it simultaneously raises the import bill, inflation risks and pressure on the currency. At the same time, Gaur said the US 10-year Treasury yield at 5.34%, its highest level since 2002, has materially raised the opportunity cost of emerging-market investments.
A stronger dollar and a weaker rupee (around ₹96.32 on 1 October) further reduce dollar-denominated returns for foreign investors. “Now, let’s add the fourth variable: portfolio rotation. With global investors finding attractive opportunities in dollar assets and parts of the Asian technology-heavy markets, India has had to compete harder for incremental foreign capital – the significantly reduced “non-AI” trade.” The silver lining, if there is one, Gaur said, is that the selling continues to look more like global asset-allocation and risk management than a wholesale loss of confidence in India’s underlying domestic growth story.
According to Gaur, the solution to the “equity return + currency return + US Treasury yield + portfolio allocation” equation does not seem to be in sight immediately. And, unfortunately, there’s no “make this painless” button on dealing screens either.
RBI policy in focus as FPI outflows continue Gaur said the most important event is the RBI Monetary Policy Committee meeting from October 5–7, with the policy decision on October 7. A Reuters poll showed around 60% of economists expecting a 25-bps hike, amid rising inflation, crude prices and rupee pressure.
For FPI flows, Gaur said the key signals to watch are: • RBI's October policy and guidance on inflation, liquidity and the rupee • Brent crude: whether it stays above $100 or retreats • US 10-year yield and dollar index • USD/INR: particularly the market's response around ₹96 • India's PMI and macro data • IPO subscriptions and new listings, where foreign participation has remained comparatively resilient • US monetary-policy expectations, especially after the latest US jobs data showed payroll growth of just 29,000 in September, against expectations of around 90,000, while unemployment rose to 4.2%.
The weaker-than-expected number has reduced expectations of an October Fed hike and could provide some relief to global bond yields. For now, the foreigners may have brought the rain, but domestic liquidity is still carrying the umbrella. The question is whether the RBI can help clear the skies.
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