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One of the most significant drivers behind FPI selling has been fresh tariff threats from the United States about additional tariffs.
FII Outflows In January 2026.
Foreign portfolio investors (FPIs), also referred to as FIIs (foreign institutional investors), have continued their selling pressure in the Indian stock market in early 2026, extending the heavy outflows seen throughout 2025. According to the latest data from the National Securities Depository Limited (NSDL), FPIs have net sold Indian equities worth around Rs 11,789 crore in January so far, contributing to downside pressure on benchmark indices like the Nifty 50.
Extension of Last Year’s Selloff
The current selling trend is essentially a continuation of 2025’s record foreign outflows, when FPIs pulled out an unprecedented Rs 166,286 crore from Indian markets. Instead of reversing that trend, overseas investors have remained cautious in the first weeks of 2026, resulting in repeated net selling across multiple trading sessions.
Global Trade Tensions and Tariff Fears
One of the most significant drivers behind FPI selling has been fresh tariff threats from the United States. The US administration has threatened new and higher tariffs on Indian goods linked to India’s purchase of Russian oil, with proposed penalties potentially reaching very high levels under a bipartisan tariff bill.
These tariff fears have dampened investor sentiment as they add uncertainty to India-U.S. trade relations. Despite several rounds of negotiations, a comprehensive trade agreement between the two countries has yet to be finalised, leaving markets nervous about future export prospects.
Geopolitical Uncertainty and Risk Aversion
Heightened geopolitical tensions around the world are also prompting risk-off behaviour among global investors. Actions such as recent military activity in places like Venezuela, continued instability in Middle Eastern regions, and broader global security concerns have amplified fears about market volatility, pushing some foreign capital into perceived ‘safe haven’ assets instead of emerging markets like India.
Currency Volatility and Rupee Weakness
Currency dynamics have further exacerbated the situation. A strong US dollar and volatility in the Indian rupee reduce returns for foreign investors when repatriated back to their home currencies. A weaker rupee essentially erodes part of the capital gains FPIs might otherwise earn from Indian equities, leading many to reduce exposure until currency stability improves.
Global Macro Headwinds
Beyond trade and geopolitics, broader macroeconomic concerns — such as uncertainty around US Federal Reserve policy, inflation expectations, and global interest rate trends — have influenced portfolio allocation decisions. Many FPIs are currently in a capital preservation mode, opting to wait for clearer signals from global economic indicators before committing more capital to riskier markets.
Market Valuations and Relative Attractiveness
While valuations in the Indian market have become relatively more attractive compared with some other emerging markets, the combination of the above headwinds means that FPIs are still cautious. Analysts at brokerage firms such as CLSA have pointed out that steady earnings growth and reasonable valuations could lure investors back. However, such a reversal largely depends on improvements in global sentiment and domestic fundamentals being perceived as sustainable.
What Could Reverse the Outflows?
Several developments could help turn the tide for FPIs in India:
Positive news on India-US trade negotiations and tariff exemptions would reduce policy-related risk.
Signs of currency stability, possibly supported by Reserve Bank of India (RBI) actions or broader shifts in forex markets, would lower hedging costs for foreign investors.
Clarity on global monetary policy, especially cues from the US Fed on future rate movements, could improve risk appetite.
Strong earnings momentum, with healthy corporate performance, may also attract long-term flows looking beyond short-term volatility.
V K Vijayakumar, chief investment strategist at Geojit Investments Ltd, said, “FII investment in early 2026 has begun with the continuation of the trend of the previous year. In 2025, FIIs had net sold equity for Rs 166283 crores impacting the performance of the Indian market and also weakening the rupee by about 5%. At the beginning of 2026 the expectation was that FIIs will turn buyers on improvement in GDP growth and corporate earnings. Also the market expectation was that the much delayed US-India treaty will materialise early in the year. But, geopolitical developments took a turn for the worse with the US intervention in Venezuela and absence of positive developments on the trade talks.”
He added that some negative comments from the the US commerce secretary gave the impression that the trade agreement will be further delayed. This impacted the market sentiments and FIIs continued selling by increasing the volume of selling in the last two trading days. The total FII selling ( cash market) through 9th January stood at Rs 11,784 crores. “The market sentiments have turned so weak that despite DII buying of Rs 17,900 crores in January through 9th, Nifty drifted down by 618 points in the week ending 9th January. It appears that if FIIs are to turn buyers in India sentiments have to improve with positive developments on US-India trade agreement and uptick in earnings growth.”
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January 11, 2026, 09:31 IST
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