Foreign Investors Continue Selling Trend in Early 2026 Sessions
Foreign institutional investors (FIIs) have kicked off 2026 with a cautious approach, continuing their selling trend in Indian equities that began in 2025. In the first two trading sessions of the new year, FIIs offloaded shares worth ₹7,608 crore, extending a significant outflow trend that saw them sell ₹22,611 crore in December alone. This brings the total foreign outflow for 2025 to a staggering ₹1,66,286 crore, marking one of the most challenging periods for FII participation in the Indian market.
Unprecedented Selling Pressure
The selling spree by FIIs throughout 2025 has been described as unprecedented, with V K Vijayakumar, chief investment strategist at Geojit Investments, labeling it the worst phase of FII selling since foreign investors began engaging with Indian markets. In total, FIIs sold equities worth ₹2.40 lakh crore in the secondary market during the year. Despite this, investments of ₹73,909 crore through the primary market helped mitigate some of the adverse effects of these outflows. December alone saw secondary market selling reach ₹30,332 crore, indicating ongoing pressure on Indian equities.
Market analysts attribute the sustained exit of FIIs to a combination of factors, including relatively high valuations in India and a global pivot towards artificial intelligence-linked trades. This relentless selling has also contributed to the depreciation of the Indian rupee, which emerged as the worst-performing major currency in 2025, falling nearly 5% against the US dollar.
Quarterly Flow Dynamics
A closer examination of quarterly flows reveals a stark contrast in FII behavior throughout 2025. The January-March quarter saw a significant outflow of ₹1,16,574 crore, setting a negative tone for the year. However, this trend reversed briefly in the April-June quarter, where inflows reached ₹38,673 crore. Despite the rocky start to 2026, market experts remain hopeful for a turnaround as the year progresses.
Vijayakumar anticipates a shift in FII strategy, driven by improvements in India’s economic fundamentals. He believes that robust GDP growth and an anticipated recovery in corporate earnings could attract net FII inflows in 2026. His optimism is echoed by other market analysts, who suggest that the outlook for the Indian market may improve as macroeconomic indicators show signs of strengthening.
Future Projections and Market Sentiment
Nilesh Jain, head vice president of equity research at Centrum Broking, shares a positive outlook for 2026, predicting that the Nifty index could reach a target of 29,731 by December, representing a potential upside of 13%. Jain attributes this optimistic view to improving macroeconomic indicators, including stronger GDP growth, easing inflation, and an end to corporate earnings downgrades.
Despite the challenges faced in 2025, including the rupee’s depreciation and high US tariffs, which contributed to a lack of trade agreements, analysts believe that the Indian market has the potential to recover. The underperformance of India relative to global emerging markets in 2025, which marked its weakest performance in three decades, has heightened expectations for a rebound as conditions improve.
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