Foreign portfolio investors (FPIs) have returned to selling Indian equities in September, withdrawing ₹20,974 crore between September 1 and September 18, 2026, as global financial conditions and geopolitical uncertainty weigh on investor sentiment.
The reversal follows two months of foreign buying. According to CDSL data cited in reports, FPIs invested ₹20,200 crore in Indian equities in July and another ₹29,630 crore in August before turning net sellers again in September.
The latest withdrawal has pushed total FPI equity outflows in 2026 so far to about ₹2.45 lakh crore, already above the ₹1.66 lakh crore withdrawn during the whole of 2025.
Importantly, the selling has not been uniform across all routes. Foreign investors have continued participating in India's primary market even as overall equity flows have turned negative.
Why Are FPIs Selling Indian Equities?
Several external pressures have combined to make emerging-market assets less attractive to global investors.
One major factor is the higher interest-rate environment in the United States. The US Federal Reserve raised its benchmark rate to a range of 3.75%–4.00%. Higher US interest rates and bond yields can reduce the relative appeal of riskier emerging-market assets because investors can obtain higher returns from US fixed-income securities.
At the same time, rising crude oil prices have become an important concern for India.
Brent crude has remained above $100 per barrel, while geopolitical tensions have increased uncertainty over energy supplies. Because India is a major importer of crude oil, sustained high prices can increase the country's import bill and add to inflationary and currency pressures.
Weak Rupee Adds Another Layer of Risk
Currency movements are another factor influencing foreign investment decisions.
The Indian rupee declined 1.1% during the previous week, its steepest weekly fall in four months. It traded around record-low levels of ₹95.92–₹95.96 against the US dollar and crossed the ₹96 level during intraday trading.
A depreciating rupee matters to overseas investors because currency losses can reduce returns when Indian investments are converted back into dollars or other foreign currencies.
The combination of a stronger dollar, elevated US yields and higher oil prices therefore creates multiple pressures on foreign capital flows at the same time.
Is the Selling Specifically About India?
Market experts have pointed to global conditions as an important part of the explanation rather than viewing the outflows solely as a judgment on India's domestic economy.
Vedant Gupte, Co-Founder and CEO of investment platform Trackk, described September's foreign selling as a “crude-and-dollar story, not an India story.”
His assessment suggests that the movement should also be considered in the broader context of investors reducing exposure to emerging markets when oil prices and US yields rise.
That broader risk-off environment is visible internationally as well. Global equity funds recorded $23.21 billion of net withdrawals in the week ended September 16, their largest weekly outflow in nine months, according to LSEG Lipper data reported by Reuters.
Foreign Investors Are Selling Debt Too
The retreat has extended beyond Indian equities.
During the period under review, foreign investors withdrew:
₹10,296 crore through the Fully Accessible Route (FAR)
₹1,817 crore through the Voluntary Retention Route (VRR)
₹1,068 crore through the general debt route
The simultaneous selling across equity and debt segments indicates that global financial conditions are influencing foreign allocation decisions across Indian asset classes.
What Could Determine FPI Flows Next?
Crude oil, US bond yields, geopolitical developments and the rupee are likely to remain important variables for foreign flows.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, said the impact of the Iran-US conflict on crude oil prices would be significant for future FPI flows. He also identified elevated oil prices and the US 10-year Treasury yield, around 5%, as negative factors for Indian equities and foreign flows.
At the same time, he pointed to India's resilient economy and expectations of improved earnings growth as supportive domestic factors.
That distinction is important: foreign selling can be influenced by global portfolio allocation and currency conditions even when investors continue to see positive aspects in India's longer-term economic and corporate earnings outlook.
What the ₹20,974 Crore Figure Really Tells Us
The September data marks a clear reversal from the foreign buying recorded in July and August, but the headline number needs context.
The ₹20,974 crore figure represents equity withdrawals through September 18, rather than the entire month. Foreign investors have also continued participating in the primary market.
For investors, the next direction of foreign flows may therefore depend less on a single domestic indicator and more on how several variables move together — particularly crude oil prices, US Treasury yields, the dollar-rupee exchange rate and geopolitical tensions.
