Foreign portfolio investors (FIIs) continued their relentless selling in Indian markets, pulling out ₹5,349 crore across all asset classes in the first two trading sessions of 2026, according to data from the National Securities Depository Limited (NSDL). This marks the continuation of a selling spree that has persisted for nine consecutive weeks.
On January 1, FIIs recorded a net outflow of ₹2,167 crore, followed by ₹3,182 crore on January 2. In the equity segment alone, FIIs sold ₹4,588 crore through stock exchanges on January 1 and ₹3,041 crore on January 2, though primary market investments of ₹20 crore provided marginal relief, bringing the net equity outflow to ₹7,608 crore for the two sessions.
December rout impact
The selling pressure comes after a brutal December, when FIIs dumped ₹30,333 crore worth of equities through exchanges. This took the total FII selling through exchanges in calendar year 2025 to a staggering ₹2.40 lakh crore. While primary market investments of ₹73,909 crore provided some cushion, the net outflow for 2025 stood at ₹1.66 lakh crore.
“The year 2025 closed with record FII selling in India. This is the worst selling by FIIs since they started investing in India,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited. “The relatively elevated valuations in India and the ‘AI trade’ were the principal factors that pushed the FIIs to sell mode in India.”
The sustained exodus has had a pronounced impact on the rupee, which depreciated by 5 per cent against the dollar in 2025. “The sustained selling by FIIs have contributed significantly to the sharp depreciation of 5 per cent in the rupee vs the dollar in 2025,” Vijayakumar noted.
DIIs cushion fall
Meanwhile, domestic institutional investors (DIIs) have stepped in to cushion the blow. “FIIs continued to remain net sellers for the eleventh consecutive week, offloading equities worth ₹2,979 crore. Meanwhile, domestic institutional investors (DIIs) maintained strong support for the market, recording net inflows of ₹2,203 crore,” said Dr Ravi Singh, Chief Research Officer from Master Capital Services Ltd.
SBI Securities highlighted the persistence of the selling trend. “FIIs have persistently sold in the equities cash market from the last 9 trading sessions. For the current week, FIIs have net sold to the tune of ₹15,831 crore which was countered to some extent by DIIs who net bought ₹17,767 crore.”
Market volatility persists
Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that FIIs remained net cash sellers to the tune of ₹3,268.60 crore as of January 2026 (till date). “Indian markets continued to trade with low volatility, as the market gradually positioned itself for the upcoming Q3FY26 earnings season and expectations surrounding the Union Budget,” he said, adding that “FPI flows are expected to remain volatile.”
2026 outlook improves
However, market experts remain cautiously optimistic about 2026. “The year 2026 is likely to witness some changes in the FII strategy. Significant improvement in India’s fundamentals are likely to attract net FII inflows in 2026. Robust GDP growth and prospects of improvement in corporate earnings in 2026 augur well for positive FII flows in 2026,” said Vijayakumar.
Prateek Agrawal, MD & CEO of Motilal Oswal AMC, echoed similar sentiments. “As the currency stabilizes at new level, flows could improve gradually. FPI activity appears to be improving 2025 saw sustained FPI outflows. However, with relative valuations having adjusted and with prospects of currency stabilizing at new levels after depreciation, and with cost of capital going down in the west, FPI activity has been less negative and we have seen a few consecutive days of buying.”
Markets stay resilient
Despite the FII outflows, the domestic market showed resilience during the week. “National market concluded the split week with optimism and touched a fresh all-time high. Strong momentum was observed in the Auto and PSU Banking sectors, while sectoral rotation was evident in Utilities,” said Vinod Nair, Head of Research at Geojit Investments Limited.
The market outlook for the coming week remains constructive, with investors focusing on US payroll and unemployment data for direction. “Overall sentiment is expected to stay constructive, though markets may move within a steady range as participants wait for clearer earnings-led triggers and clarity on the India-US trade deal,” Nair added.