Foreign Portfolio Investors (FPIs) continued to reduce their exposure to Indian stocks in the first week of June, withdrawing nearly Rs 43,000 crore from the equity market.
According to data from the National Securities Depository Ltd (NSDL), FPIs pulled out Rs 42,927 crore during the week. This has pushed total foreign investor outflows from Indian equities to Rs 2.67 lakh crore so far in 2026.
The figure has already crossed the Rs 1.66 lakh crore withdrawn during the entire year of 2025.
Global AI Opportunities Attract Capital
Market experts said global investors are moving funds towards technology and artificial intelligence (AI)-related opportunities outside India.
Rajesh Singla, Founder of Alpha AMC, said large global investment opportunities, including the expected IPO of private space company SpaceX and growing activity in leading AI firms, are attracting significant international capital.
This shift has led to a temporary movement of funds away from emerging markets such as India.
Weak Rupee Adds to Concerns
Another major reason for the continued outflows is the weakness in the Indian rupee.
The rupee has fallen nearly 6 per cent against the US dollar so far in 2026 and about 10 per cent over the past year. It has weakened from levels in the mid-80s to around 95.5 per dollar despite efforts by the Reserve Bank of India (RBI) to support the currency.
Experts say currency weakness reduces returns for foreign investors and makes Indian assets less attractive.
Selling Trend Continues Through 2026
FPIs have remained net sellers for most of the year.
They withdrew Rs 35,962 crore in January before briefly turning buyers in February, investing Rs 22,615 crore. However, heavy selling resumed in March with a record outflow of Rs 1.17 lakh crore.
This was followed by withdrawals of Rs 60,847 crore in April and Rs 32,963 crore in May.
Government and RBI Take Steps
To encourage foreign investment, the government and RBI have introduced several measures.
These include tax exemptions on interest and capital gains from certain government securities, lower hedging costs on FCNR deposits, an expanded forex swap facility, easier access to government bonds through the Fully Accessible Route (FAR), and higher investment limits for NRIs and OCIs.
Debt Market Sees Positive Flows
While equity markets witnessed heavy selling, foreign investors continued to show interest in debt instruments.
FPIs invested more than Rs 2,600 crore in debt securities through the FAR route during the first week of June. Total debt inflows through this route have reached Rs 17,230 crore so far in 2026.
Analysts believe foreign inflows into Indian equities could improve if the global AI investment frenzy cools and investors once again look towards emerging markets for growth opportunities.