Foreign portfolio investors stepped up selling in Indian equities in September as high US bond yields, elevated crude oil prices, a weaker rupee and global uncertainty reduced the appeal of Indian assets. The latest data points to a sharp reversal after foreign investors had returned as buyers in July and August.
Foreign investors reverse two-month buying streak
FPI outflows from Indian equities became a major market story in September after foreign investors had invested heavily during the previous two months.
According to data reported during September, FPIs had invested around ₹20,200 crore in Indian equities in July and ₹29,630 crore in August. The September selling therefore marked a clear reversal in the recent trend.
By September 20, FPIs had already withdrawn ₹20,974 crore from Indian equities during the month. At that stage, the selling was being linked to higher US interest rates and bond yields, elevated crude prices, global uncertainty and weakness in the Indian rupee.
Later data showed the selling intensified. Reuters reported on September 30 that foreign investors had sold Indian equities worth ₹256.62 billion, or about ₹25,662 crore, in September, making it the largest monthly FPI outflow in six months.
High US yields change the investment equation
One of the biggest factors affecting FPI flows is the rise in US Treasury yields.
The US 10-year Treasury yield moved above 5% during the recent market volatility. Higher US yields can make dollar-denominated assets more attractive to international investors because they offer higher returns with comparatively lower perceived risk.
For emerging markets such as India, this can create pressure on foreign capital flows.
Reuters reported that the rise in US Treasury yields had narrowed the yield advantage offered by Indian assets. At the same time, a stronger dollar can increase currency-related risks for foreign investors holding rupee-denominated assets.
This combination has made the external environment more challenging for Indian equities.
Crude oil adds another pressure point for India
Oil prices have also become an important factor behind the market pressure.
Brent crude was trading around the $105 per barrel level in late September, according to Reuters reporting. India imports a large share of its crude oil requirements, so sustained increases in international oil prices can affect the country’s import bill and inflation outlook.
Higher crude prices can also put pressure on India’s current account and the rupee. For global investors, that creates another layer of uncertainty when deciding whether to maintain exposure to Indian equities.
The combination of expensive oil and elevated US bond yields has therefore affected both the macroeconomic outlook and foreign investor risk appetite.
Indian stocks remain under pressure
The FPI selling has come against a broader period of weakness in Indian equities.
On September 29, the Nifty 50 declined 0.28% to 22,716.2, while the BSE Sensex fell 0.33% to 72,529.07. Reuters reported that the benchmarks had already lost nearly 2% during that week and around 6% over the previous seven weeks.
The pressure has not been limited to large companies. Small-cap and mid-cap stocks also came under pressure during volatile sessions.
Market weakness has been accompanied by concerns around expensive valuations in parts of the Indian market, particularly when compared with alternative investment opportunities available to global funds.
For domestic investors, however, FPI selling does not automatically translate into a similar level of selling across the entire market. Domestic institutional investors and retail investors can provide a counterbalance when foreign funds reduce exposure.
September marks a sharp change from August
The timing of the reversal is significant.
Foreign investors had returned to Indian equities in July and August, providing support to the market after several months of heavy selling earlier in 2026. By September, however, the external environment had changed.
Data cited by Reuters showed foreign investors had added ₹702 billion, or about $7.34 billion, to Indian equities through August before withdrawing ₹278.1 billion during September.
This means the September reversal was large enough to materially offset a portion of the foreign buying recorded earlier in the year.
The broader trend also shows that foreign ownership of Indian equities has weakened. Reuters reported that overseas ownership of local equities was at a 17-year low, adding another dimension to the FPI flow story.
India is also trying to make FPI access easier
The government and regulators are simultaneously working to make India more accessible to foreign investors.
SEBI and the RBI are working together to simplify the onboarding process for FPIs, according to SEBI Chairman Tuhin Kanta Pandey. The objective is to make the entry process more efficient for overseas investors.
India also introduced the SWAGAT-FI framework in June for certain lower-risk foreign investors, including sovereign wealth funds, pension funds, insurance companies and regulated public retail funds.
The framework extends the registration period for eligible investors to 10 years from the earlier three-year cycle. Reuters reported that 164 entities had registered through the route in just over 100 days.
However, easier market access does not necessarily mean immediate investment flows. Global investors continue to consider factors such as interest rates, currency movements, commodity prices and geopolitical risks when allocating capital.
What investors will watch next
The direction of crude oil prices and US Treasury yields will remain important for Indian markets.
A sustained increase in oil prices could put additional pressure on India’s inflation and external balances. Meanwhile, higher US yields could continue to compete with emerging-market assets for international capital.
The rupee will also remain an important indicator because currency depreciation can reduce the dollar-denominated returns of foreign investors.
Market participants will also watch whether domestic institutional buying can offset foreign selling and whether foreign investors return once global financial conditions become more supportive.
For now, September’s numbers show that the FPI recovery seen in July and August has been interrupted by a tougher global market environment.
Key Takeaways
- FPIs sold about ₹25,662 crore of Indian equities in September, according to Reuters data reported on September 30.
- The ₹20,974 crore figure referred to cumulative September equity outflows reported around September 20, not a two-day withdrawal.
- Higher US Treasury yields, crude oil prices and rupee weakness have weighed on foreign investor sentiment.
- FPI selling reversed the buying trend seen in July and August, when foreign investors invested ₹20,200 crore and ₹29,630 crore respectively.
FAQs
Why are FPIs selling Indian stocks?
The recent selling has been associated with higher US bond yields, elevated crude oil prices, a stronger dollar, rupee weakness and broader global uncertainty. These factors can reduce the relative attractiveness of emerging-market equities.
How much did FPIs withdraw from Indian equities in September 2026?
Reuters reported that FPIs sold Indian equities worth ₹256.62 billion, or around ₹25,662 crore, in September. This was the highest monthly outflow in six months.
Did FPIs invest in India before September?
Yes. FPIs invested around ₹20,200 crore in Indian equities in July and ₹29,630 crore in August before reversing course in September.
Will FPI selling necessarily mean Indian stocks will continue falling?
Not necessarily. Market performance also depends on domestic institutional flows, corporate earnings, valuations, economic data, interest rates and global market conditions. FPI selling is one factor among several influencing Indian equities.
