Foreign Portfolio Investors (FPIs) continued their selling spree in Indian equities during the first week of June, withdrawing nearly Rs 43,000 crore as global capital increasingly shifted toward technology and artificial intelligence (AI)-driven investment opportunities abroad. Persistent weakness in the Indian rupee and concerns over earnings growth further dampened foreign investor sentiment.

Key Highlights

• Foreign investors withdrew Rs 43,000 crore from Indian equities during the first week of June.
• Global AI opportunities and rupee weakness pushed 2026 FPI outflows to Rs 2.67 lakh crore.

According to data from the National Securities Depository Ltd (NSDL), cumulative FPI outflows from Indian equities have surged to approximately Rs 2.67 lakh crore so far in 2026, already exceeding the total withdrawal of Rs 1.66 lakh crore recorded during the entire calendar year 2025.

AI Investment Wave Diverts Global Capital

Market experts attribute the continued outflows to a combination of global and domestic factors. Apart from elevated US bond yields and a stronger dollar, investors are increasingly reallocating funds toward high-growth technology and AI-linked opportunities in developed markets.

The global AI investment theme has attracted substantial capital, with investors showing strong interest in upcoming technology listings and AI-focused companies. This capital rotation has temporarily reduced allocations to emerging markets, including India.

Foreign investors remained net sellers in almost every month of 2026, except February when they invested Rs 22,615 crore, marking the strongest monthly inflow in nearly 17 months. However, sentiment turned sharply negative in March, leading to record outflows that continued through April, May, and now June.

Rupee Weakness Adds to Investor Concerns

The depreciation of the Indian rupee has emerged as another significant factor driving foreign fund withdrawals. The currency has weakened considerably against the US dollar in 2026, reducing returns for overseas investors and prompting portfolio reallocations.

Geopolitical tensions in West Asia and rising crude oil prices have further intensified concerns around India's inflation outlook, current account deficit, and external sector stability. Higher oil prices have increased pressure on the rupee while contributing to broader risk aversion among global investors.

Government and RBI Roll Out Measures to Attract Capital

Recognising the importance of foreign portfolio flows in supporting the balance of payments and financing the current account deficit, policymakers have announced a series of measures aimed at boosting investor confidence.

Recent initiatives include tax exemptions on interest and capital gains from certain government securities held by foreign investors, expansion of the Fully Accessible Route (FAR) for government bonds, enhancements to the forex swap framework, and measures to encourage non-resident investments.

Despite heavy equity outflows, India's debt market has continued to attract foreign interest. FPIs invested more than Rs 17,000 crore in government bonds through the Fully Accessible Route during 2026, highlighting continued confidence in India's fixed-income market.

Also Read: India Unveils Tax Breaks and Bond Reforms to Attract Capital

Outlook Hinges on Global AI Trade

Market participants believe a sustained revival in foreign inflows may depend on a moderation of the global AI-driven investment rally that has been attracting capital away from emerging markets.

While India continues to benefit from strong domestic demand and resilient economic growth, foreign investors are likely to remain cautious until currency stability improves, earnings growth strengthens, and global capital allocation trends become more favourable for emerging economies.