Indian Stocks Face Severe Foreign Sell-Off in May; Capital Outflow Hits Record INR 2.2 Lakh Crore This Year
Foreign Portfolio Investors (FPIs) pulled an additional INR 27,048 crore from Indian equities in May 2026, pushing total year-to-date capital flight to a staggering INR 2.2 lakh crore. This rapid unwinding, which already outpaces the entire capital exit of 2025, has placed severe pressure on the local currency, dragging the Indian Rupee down to an all-time low of 96.14 against the US Dollar.
According to data from the National Securities Depository Limited (NSDL), foreign investors have been net sellers in the Indian capital market for every month of 2026 except February. The year began with an outflow of INR 35,962 crore in January, followed by a brief recovery in February when investors pumped in INR 22,615 crore—marking a 17-month monthly high. However, March witnessed a historic sell-off of INR 1.17 lakh crore, and the bleeding continued with exits of INR 60,847 crore in April and INR 27,048 crore in May. In comparison, FPIs pulled out a total of INR 1.66 lakh crore in all of 2025, a benchmark that 2026 has breached in just five months. Himanshu Srivastava, Principal Research Manager at Morningstar Investment Research India, highlights that global growth uncertainty, volatile crude oil prices, a strengthening US Dollar, and surging US bond yields have dampened the appeal of emerging markets, redirecting capital to safer, higher-yielding western assets. Additionally, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that this relentless selling, paired with a widening current account deficit, has pushed the Indian Rupee down from 90 per USD at the start of the year to a historic low of 96.14 as of May 15. Vijayakumar also points out that global capital is aggressively pivoting toward tech-heavy regions dominating the Artificial Intelligence (AI) boom, leaving India temporarily sidelined until the current AI market frenzy cools down.