FPI selling crosses Rs 52,000 crore in October as Nifty defies foreign exodus

Foreign portfolio investors pulled out over Rs 52,000 crore from Indian equities in October, surpassing September outflows. Despite persistent FPI selling driven by rising US Treasury yields and elevated crude oil prices, benchmark indices Nifty and Sensex rebounded sharply, supported by robust domestic institutional buying and IT sector gains.

Foreign portfolio investors (FPIs) continued to withdraw money from Indian equities in the week ended October 16, taking their October selling past Rs 52,000 crore and surpassing the entire outflow recorded in September, even as domestic stocks staged a strong recovery.

According to settled market data, FPIs sold shares worth a net Rs 7,934 crore during October 12 to 16, taking the month's cumulative outflows to approximately Rs 52,100 crore. This is higher than the Rs 35,861 crore withdrawn in September, with two weeks still remaining in October.

Foreign investors have now pulled out more than Rs 3 lakh crore from Indian equities in calendar year 2026, highlighting the sustained pressure on domestic markets from rising global bond yields, elevated crude oil prices and uncertainty over US interest rates.

Provisional exchange data showed selling of nearly Rs 8,990 crore during the week. FPIs sold shares worth Rs 1,708 crore on Monday, Rs 1,305 crore on Tuesday, Rs 1,857 crore on Wednesday and Rs 5,285 crore on Thursday, before turning buyers on Friday.

Friday's provisional purchases of Rs 1,166 crore ended a 15-session selling streak that began on September 24. Over that period, foreign investors had withdrawn approximately Rs 84,000 crore, according to provisional figures.

However, settled data continued to show net selling for the week, with outflows recorded on four of the five reporting days. The sustained selling comes despite a sharp rebound in domestic equities. The Nifty gained 2.8% during the week to close at 23,146, while the Sensex advanced 3.1%.

Technology stocks led the recovery, with the Nifty IT index surging 11.7% on improving sentiment around artificial intelligence-related business opportunities and quarterly earnings from major IT companies.

Domestic institutional investors continued to provide support to equities, absorbing part of the foreign selling and helping benchmark indices recover despite persistent overseas outflows.

The divergence between FPI flows and market performance suggests that domestic liquidity remains an important factor in supporting Indian equities even as global investors reduce exposure.

Why are foreign investors selling?

Higher US bond yields remain one of the biggest pressures on emerging markets, including India. The US 10-year Treasury yield climbed to around 5.3% after September inflation came in at 3.7%, above expectations of 3.6%. The benchmark yield had earlier approached 5.365%, near its highest level in 24 years.

Higher Treasury yields increase the attractiveness of US dollar assets, prompting global investors to reassess their allocations to emerging markets. The dollar index also climbed to an 18-month high, adding to the pressure on emerging-market currencies and capital flows.

Expectations of another interest rate increase by the US Federal Reserve have strengthened following the inflation data. Market-implied probabilities of a rate hike at the October 28 meeting rose from about 22% to more than 40%, according to the FPI flows report.

Crude oil prices have added to the concerns. Brent crude, which opened the week at $104.95 per barrel, touched $110 on Friday. Higher oil prices pose risks to India's inflation outlook, current account deficit and corporate profitability, particularly for businesses dependent on imported energy.

The rupee, however, recovered about 1.9% during the week to 95.07 against the dollar, supported by measures announced by the Reserve Bank of India, including a dedicated dollar window for public-sector oil marketing companies.

The recovery followed the RBI's October 7 decision to increase the repo rate by 25 basis points to 5.50%, while shifting its policy stance towards calibrated tightening.

Disclosure: This article has been written by Podishetti Akash, who is not a SEBI-registered Research Analyst or an Investment Adviser. Podishetti Akash and his 'relative(s)' (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclosures here.