FPI Record Selling: ₹3.1 Lakh Crore Withdrawn in 2026, but a 'Flight to Safety' into Government Bonds
Selling by foreign portfolio investors (FPIs/FIIs) in the Indian stock market shows no sign of slowing. In calendar year 2026 so far, FPIs have made net withdrawals of more than ₹3.1 lakh crore from Indian equities, one of the biggest outflows in Dalal Street's history. Notably, foreign funds have also invested heavily in government bonds during the same period.
(Source: Moneycontrol, The Telegraph India)
Outflow Nearly Double That of 2025
According to reports, FPIs withdrew a total of ₹1.66 lakh crore in 2025. This year's figure is nearly twice that. Reports also indicate that a large share of the FII selling came in September, and the Nifty is down around 13% so far in 2026.
(Source: Moneycontrol, reports based on depository data)
Sector-wise Impact: Banking and Auto Hit Hardest
According to Screener.in's sector-wise FII flow dashboard, selling pressure over the past year has been heaviest on core growth sectors:
- Financial Services (BFSI): This sector, which accounts for roughly 28% of FII total AUM, saw ₹1,32,350 crore withdrawn over the year. It also saw an outflow of ₹10,628 crore in the last fortnight.
- FMCG: ₹55,778 crore withdrawn, attributed to sluggish rural demand and weak results.
- Automobiles: Net outflow of ₹49,123 crore.
- Healthcare and Pharma: ₹17,689 crore.
- Power: ₹15,277 crore.
(Source: Screener.in FII sectoral dashboard; Moneycontrol)
'Flight to Safety': ₹70,783 Crore into Sovereign Bonds
Despite pulling money out of equities, foreign investors have not left India entirely. Over the past year, they made a net investment of ₹70,783 crore in the sovereign debt category. When global conditions turn uncertain, investors sell risky assets like stocks and park money in safer options like government securities. In market parlance, this is called a "flight to safety." Foreign investors have also shown continued interest in the "Others" category (+₹26,960 crore) and Metals & Mining (+₹18,555 crore).
(Source: Screener.in; The Telegraph India)
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Signs of 'Value Buying' in the IT Sector
Amid the negative mood, the IT sector brought some relief. Its one-year net flow is negative at ₹31,772 crore, but in the last 15 days FIIs made net purchases of ₹2,599 crore in the sector. According to experts, valuations of many large IT companies have become attractive after a prolonged correction.
(Source: Screener.in fortnightly net flow data)
Why Are FPIs Selling? Three Big Reasons
- The "Buy China, Sell India" trade: After China's economic stimulus, global funds increased allocations there, while the expensive valuations of the Indian market prompted profit-booking.
- Strong dollar and high US bond yields: Because of high interest rates in the US, the 10-year Treasury yield remains strong. This is driving capital out of emerging markets.
- Slowdown in corporate earnings: Results for the September quarter (Q2 FY27) showed pressure on margins and earnings, which increased uncertainty about future profits.
(Source: Moneycontrol market reports, October 2026)
Support from DIIs and Retail Investors
Despite such heavy selling, the market has not seen a major panic crash. The main reason is domestic institutional investors (mutual funds, LIC, etc.) and the retail money that comes in every month through SIPs. This domestic flow is acting as a safety cushion for the market.
What Should Retail Investors Do?
In the current environment, the market is in defensive mode. Experts advise avoiding aggressive trading, keeping asset allocation balanced, and investing in a staggered manner through mutual funds. (This is for information only, not investment advice.)
Data Sources- NSDL/CDSL depository data (as cited in the reports)
