11 years, zero net FII flow: How a $64 billion outflow erased 9 years of equity buying

Foreign institutional investors (FIIs) have spent the past two years wiping out almost nine years of buying in Indian stocks, leaving cumulative FII equity flows since October 2015 virtually unchanged. From October 2015 till now, foreign investors recorded net equity flows of approximately minus $110 million. That means nearly $63.6 billion of selling since October 2024 has erased the $63.5 billion accumulated during the preceding nine years.

The reversal has intensified in 2026. Foreign investors have sold $32.8 billion in Indian equities so far this year, following $18.9 billion of outflows in 2025. March 2026 saw the biggest monthly withdrawal at $12.7 billion, followed by $6.5 billion in April and $5.2 billion in June.

The flow reset reflects a sharp deterioration in foreign investor conviction, driven by higher US Treasury yields, a stronger dollar, elevated oil prices and concerns over India’s relative returns. Amnish Aggarwal of PL Capital said India was unlikely to attract significant foreign money in the near term with the US Treasury rate at 5.3%, limited exposure to artificial intelligence and semiconductor themes, and only 1.2% annualised dollar returns in the Nifty 100 over five years.


He also said foreign flows had been “very patchy since 2021” and could remain volatile amid rising crude prices, higher interest rates, deficient monsoon conditions and the risk of a strong El Niño.

The selling has not been uniform. According to Motilal Oswal Financial Services, financial services, autos and oil and gas have been among the sectors facing the heaviest foreign selling in 2026. Foreign investors sold $12.2 billion of financial stocks, $4.1 billion of automobiles and $3.9 billion of oil and gas shares, while adding exposure to metals, capital goods and services.

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The shift has also widened the gap between large-cap stocks and smaller companies. Foreign investors have focused their selling on large-cap-heavy sectors, contributing to the relative underperformance of large-cap equities against mid- and small-cap stocks.

Domestic investors have helped absorb some of the pressure. In September, foreign investors sold $4.1 billion while domestic institutions invested $8 billion, according to Motilal Oswal. The brokerage said strong domestic liquidity, resilient macroeconomic conditions, earnings growth and cheaper valuations were improving the risk-reward balance, even though a sharp recovery in foreign inflows was unlikely in the near term.

HSBC said Indian equities were becoming more attractive as global investors looked beyond artificial intelligence-related trades and sought diversification. It said the Nifty 50 was trading at about 16 times 12-month forward earnings, a valuation level reached only twice in the past decade.

Financial stocks were trading at 1.7 times forward book value, around 30% below their five-year average of 2.4 times. Information technology stocks were valued at about 18 times forward earnings, below their five-year average of roughly 23 times.

Also Read |FII ownership hits 17-year low, but foreign holdings in Indian equities rise 3.6 times to $783 billion: Report

Still, HSBC warned that higher bond yields and energy prices could continue to weigh on the rupee and limit foreign investor enthusiasm. It said lower bond yields and oil prices would be meaningful catalysts for Indian equities.

The size of the foreign selling also needs to be read alongside primary market activity. Motilal Oswal said foreign investors had sold nearly $63 billion in the secondary market over the past two years while investing $21 billion in primary-market offerings.

However, the collapse in secondary market flows does not mean foreign investors have entirely abandoned India. It suggests they have become more selective, directing money toward new issues and specific companies while cutting exposure to listed shares.

Kotak Institutional Equities has challenged the idea that foreign flows alone explain market performance. It said, “The typical market explanations for stock price movements related to ‘flows’ are risible,” arguing that earnings growth and valuation multiples remain the key drivers of stock prices.

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