Market Desk: The year 2026 is proving to be quite challenging so far for the Indian stock market. Indiscriminate selling by foreign portfolio investors (FPIs) has increased the concern of market experts and investors. According to the latest data, in the first five months of the year 2026 alone, foreign investors have withdrawn a huge amount of more than Rs 2 lakh crore from the Indian equity market. This figure has also exceeded the total withdrawal of the last entire year (2025) (1.66 lakh crore). Along with global factors, there is also a deep connection of the market of neighboring country ‘Shanghai Composite’ behind this turmoil in the market.
Selling record: Investors’ confidence broken in March and April
According to NSDL data, foreign investors have been ‘net sellers’ in every month of this year except February. After a withdrawal of about Rs 35,962 crore in January, the selloff in March broke all records with Rs 1.17 lakh crore leaving the market in one month alone. Even in April, a sale of Rs 60,847 crore was recorded and in the first 10 days of May itself Rs 14,231 crore was withdrawn. Experts say that due to high valuations and global uncertainty, foreign investors are looking for safer options by withdrawing money from emerging markets like India.
Shanghai Composite Connection: Why are investors turning to China?
The strategy of ‘Sell India, Buy China’ is believed to be a major reason for the withdrawal of money from the Indian market. For a long time, the valuations of the Indian market had become quite expensive, whereas in comparison, China’s ‘Shanghai Composite’ index was available at a much cheaper valuation. Investors’ perspective towards China has changed after the relief packages announced by the Chinese government to handle its economy. In the hope of better returns at lower prices, foreign funds are now booking profits from the Indian market and investing their money in markets like Shanghai and Hong Kong.
Triangular attack of inflation, interest rates and crude oil
Emerging markets (countries like India) have lost their shine due to rising interest rates in the global market and strengthening of bond yields in America. Apart from this, due to the ongoing geopolitical tensions in West Asia, there has been a rise in the prices of crude oil. India is a big oil importing country, hence there is a fear of increase in inflation and trade deficit due to increase in oil prices. These concerns have forced foreign investors to stay away from Indian stocks.
Domestic investors (DII) took charge, but for how long?
It is a matter of relief that while foreign investors are fleeing the market, domestic institutional investors (DIIs) and retail investors have taken the lead. So far in the year 2026, domestic investors have invested more than Rs 3 lakh crore in the market, which has provided support to the market to a great extent from the fall. However, experts believe that if FPI selling continues at this pace, it may be difficult to sustain the market growth for a long time on the basis of domestic investment.
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