FIIs turn their backs on India! Selling of ₹200,000 crore has rattled the market. Is there any hope for recovery?
Foreign institutional investors sold a record amount of over ₹2 trillion from the Indian equity market in 2026. Shifts in global interest rates, geopolitical tensions, and the attractiveness of other emerging markets are considered the main reasons for this. The report analyzes whether domestic institutional investors will be able to withstand this selling pressure and how the market will behave in the coming months.
Foreign institutional investors (FIIs) sold domestic equities worth ₹2.06 lakh crore in 2026, remaining net sellers for the third consecutive month. In May, foreign investors have sold ₹14,231 crore worth of shares from the stock market so far.
On Friday, FIIs sold domestic equities worth ₹4,110.60 crore, while DIIs were net buyers of ₹6,748.13 crore. Despite a strong push from domestic investors, benchmark indices fell sharply on Friday.
This was the second consecutive day of declines, driven by heavy selling in financial stocks. The Nifty fell 150.50 points, or 0.62%, to close at 24,176.15, while the BSE Sensex declined 516.33 points, or 0.66%, to close at 77,328.19.
How long will foreign investors remain angry?
Commenting on the current trend, N. Arunagiri, CEO of TrustLine Holdings, said that FIIs continue to sell in domestic markets, despite selling nearly $50 billion since September 2024.
This comes at a time when South Korea has received approximately $4 billion and Taiwan approximately $5.5 billion.
Arunagiri added that India is still not receiving its fair share of emerging market allocations. This clearly indicates that FIIs are currently not finding India attractive from an allocation perspective.
Take Yourself On A Food Tour Of Charlotte
As a result, large-cap stocks have underperformed expectations, while strong domestic investment flows have continued to support the SMID (small and mid-cap) segment.
Until FIIs significantly increase their allocation to India, the market's performance is likely to depend largely on its own merits.
This means that the market will be driven by clarity in corporate earnings and bottom-up opportunities, rather than a momentum rally in large-cap stocks.
Which factors will be important?
Bajaj Broking said that going forward, institutional investor activity is expected to be largely influenced by global developments. They added that the progress or deterioration in the ongoing negotiations between the US and Iran will be a key factor to monitor.
This could have a profound impact on geopolitical stability and fluctuations in crude oil prices. Currently, Gulf crude oil is trading above $100 per barrel. Experts believe that crude oil prices may fluctuate in the coming days.
How foreign investors will sell in 2026
Heavy selling in March due to the war made it the worst month of the year, with withdrawals of ₹1,17,775 crore. April was no better, with withdrawals of ₹60,847 crore. Foreign investors turned net buyers in February, purchasing shares worth ₹22,615 crore in domestic markets.
In January, they had sold shares worth ₹35,962 crore. In 2025, FIIs' buying sentiment was mixed, but the overall trend was bearish. They withdrew ₹1,66,286 crore from Indian markets as delays in trade deals and high valuations weighed on investor sentiment.