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29 Jan 2026
Foreign portfolio investment (FPI) flows experienced significant volatility in FY26, resulting in a net outflow of $3.9 billion as of December 2025, amidst heightened global uncertainty and a redirection of capital towards AI-centric markets, according to the Economic Survey 2025–26.
The equity sell-off had a significant impact on sectors such as IT and healthcare, leading to continued FPI equity outflows during FY26 (April–December). The volatility in foreign capital contributed to a balance of payments deficit of $6.4 billion in the first half of FY26, compared with a surplus of $23.8 billion in H1 FY25.
Looking ahead, the survey projected a more favourable outlook for FPI inflows into the debt market, supported by Sebi’s relaxation of investment norms and ongoing India–US trade discussions.
As of December 2025, the asset base under custody of FPIs stood at Rs 81.4 lakh crore, a 10.4% rise from March 31, 2025, largely due to valuation gains in equities and steady accumulation in debt.
Domestic institutional investors helped stabilise markets amid foreign outflows, with DII ownership in NSE-listed equities rising to 18.7% as of September 2025.
Within NSE-listed equities, FPI ownership declined to 16.9% in Q2 FY26, reflecting global risk aversion and sectoral reallocations.
Despite the challenges faced by FPI flows, the survey remains optimistic about the outlook for FPI inflows, particularly in the debt market, as the Indian economy continues to grow and attract foreign investment.
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