Foreign Portfolio Investors (FPIs) have pulled out around ₹1.8 lakh crore from Indian equities in 2026 to date, exceeding the ₹1.66 lakh crore exit recorded in 2025.
This trend is largely driven by rising geopolitical tensions in West Asia (including the US-Iran conflict that began in late February), increasing crude oil prices, depreciation of the rupee, and a global aversion to risk, as per experts.
Although recent reports do not provide a complete breakdown of the destinations for these inflows, it seems that FPIs are shifting their investments to markets that present lower valuations and specific sectoral advantages, particularly in Japan, Taiwan, South Korea, and select European countries. Additionally, there is evidence of profit-taking from previous gains in India being reinvested on a global scale, as noted by experts.
Investors might be curious about the direction of FPI this year as well as last year. As per Bloomberg data, several global equity markets have witnessed strong foreign institutional investor (FII) inflows over the past 12 months. The United States led with inflows of $753.5 billion as of January 31, 2026, followed by the Euro Area at $529.1 billion (January 31, 2026) and Luxembourg at $484.3 billion (December 31, 2025).
According to Bloomberg data, China also saw notable inflows of $120.5 billion, while Japan attracted $77.6 billion as of April 3, 2026. Among emerging markets, Brazil recorded inflows of $14.5 billion (April 8, 2026), while Turkey saw comparatively modest inflows of $3.9 billion as of April 3, 2026.
Here’s what experts say
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd, explained that the energy crisis triggered by the conflict in West Asia, the potential impact of the crisis on Indian economy and sustained depreciation of the rupee kept the FPIs on sell mode.
Vijayakumar noted that markets like South Korea and Taiwan are viewed as more appealing for Foreign Portfolio Investors, as these markets are anticipated to achieve significantly better earnings growth than the modest growth projected in India for FY27.
As noted by Vijayakumar, the significant decline in the market following the onset of the war has brought valuations to a fair level, although they aren’t particularly enticing purchases at this time.
The increase in equity mutual fund inflows to ₹40,450 crores and the monthly SIP contributions reaching ₹32,087 crores in March are positive signs for the market. Given the robust mutual fund inflows, the selling by FPIs is unlikely to have a major impact on the market.
“However, FPIs turning buyers in the market will depend on the situation in West Asia and crude prices. If there is de-escalation in the conflict and crude declines significantly, India’s macros will not be impacted materially. If the conflict prolongs India’s macros will be impacted. It would be unrealistic expect FPIs to turn buyers in such a scenario,” added Vijayakumar.
Similarly, Sunny Agrawal – Head of Fundamental Research at SBI Securities, said that in the backdrop of weakening USDINR and likely fear of increase in inflationary pressure in India, FIIs are chasing new age tech businesses in the developed world like US, Europe and are inclined towards commodity facing businesses in Brazil, as prices of commodities continues to remain buoyant etc.
However, Agrawal added that within India too, capital goods sector has witnessed inflows from FIIs on the back of likely growth due to capex across sectors like semiconductor, power, power ancillary, CNC machinery etc. With valuations turning comfortable, once the war related concerns subsides, FIIs flow should turn positive.
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund opined that every time this happens, we ask why are they leaving? We rarely ask the more uncomfortable question: where are they going, and why does that make more sense to them?
“As Indians, we tend to be frogs in a well. Global investors are not. They are cold, rational capital allocators chasing four things: earnings growth, currency stability, reasonable valuations, and macro predictability. India is currently faltering on all four.
South Korea, Taiwan, and China are actively attracting this capital, cheaper than India even post-correction, with stronger corporate earnings visibility. The Federal Taiwan and South Korea alone absorbed over $25 billion in a recent three-month window, riding the global AI infrastructure wave. Benefits And Pensions Monitor Meanwhile, India offers them a weakening rupee, muted earnings, unresolved trade deals, and valuations that still aren’t cheap enough to justify the risk,” said Gulati.
Now add the Fed into the equation, Gulati said that the FOMC has held rates at 3.5%–3.75% for two consecutive meetings, with the dot plot pointing to at best one cut this year — and even that is conditional. CNBC Higher-for-longer US rates keep the dollar strong, elevate the risk-free return, and raise the bar for every emerging market. India, an oil importer with currency pressure and a widening macro risk, sits on the wrong side of that trade.
“This is not a cyclical blip. It’s a structural verdict. FPIs aren’t punishing India — they’re simply allocating rationally. Until we fix the fundamentals, there is no compelling reason for global capital to return. The question is whether India’s policymakers are paying attention,” added Gulati.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
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