The recent withdrawal of foreign portfolio investments (FPIs) from Indian equity markets is part of a broader trend witnessed across emerging markets and is not specific to India alone, the government informed the Lok Sabha on Monday.
In a written reply to a question in Parliament, Minister of State for Finance Pankaj Chaudhary said foreign investor movements in Indian equities have been influenced by a combination of global and domestic factors, including geopolitical uncertainties, trade-related concerns, currency movements, and changes in global investment strategies.
"The recent foreign portfolio outflows from Indian equities are part of a broader pattern noticed in emerging markets and not altogether specific to India," Chaudhary said in his reply.
The minister explained that changes in FPI investment patterns have been driven by several factors, including tensions in global markets, uncertainty over international trade tariffs, shifts in investor sentiment, fluctuations in exchange rates, and portfolio rebalancing by global funds across different emerging economies.
According to data from the National Securities Depository Limited (NSDL) cited by the government, foreign portfolio investors were net sellers of Indian equities worth Rs 1,52,691.04 crore during 2025-26. This marked a reversal from the previous two years, when FPIs recorded net inflows of Rs 20,019.66 crore in 2024-25 and Rs 3,39,064.57 crore in 2023-24.
Despite the recent outflows, the government said investor confidence in Indian markets remains intact, pointing to the continued strength of domestic institutional investors (DIIs), particularly mutual funds, in supporting equity markets.
Chaudhary said FPIs have demonstrated confidence in the Indian stock market over the long term, with their gross purchases increasing significantly in recent years. According to the data shared in Parliament, gross FPI purchases rose from Rs 23,87,375.71 crore in 2021-22 to Rs 44,64,817.84 crore in 2025-26.
The government also addressed concerns over the impact of foreign fund withdrawals on the Indian rupee. It said exchange rate movements are determined by a wide range of factors rather than any single component. These include movements in the US Dollar Index, foreign capital flows, domestic and global interest rates, international crude oil prices, and India's current account position.
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The minister emphasised that India's economic fundamentals continue to remain strong despite global uncertainties. He highlighted that the country's real gross domestic product (GDP) has grown at more than 7 per cent over the past three years, supported by strong domestic demand, healthier corporate balance sheets, and prudent fiscal management.
The government further stated that high-frequency economic indicators for the first quarter of financial year 2026-27 suggest that economic activity continues to maintain momentum. It said India's growth prospects remain supported by domestic consumption, infrastructure development, and ongoing reforms aimed at improving productivity and investment.
On concerns regarding the impact of market volatility on retail investors, the government said investment outcomes depend on individual investment choices, asset allocation strategies, and broader market conditions. It added that factors such as geopolitical developments, changing risk perceptions, and global financial trends influence market performance and returns.
The government also outlined several steps taken by various authorities, including the Ministry of Finance, the Reserve Bank of India (RBI), and the Securities and Exchange Board of India (SEBI), to make investment processes smoother for foreign portfolio investors.
These measures include regulatory simplification, improvements in operational procedures, higher investment limits for certain categories of overseas investors, and dedicated investor outreach programmes aimed at improving transparency and ease of participation in Indian financial markets.
The government maintained that while global factors may lead to periodic fluctuations in foreign investment flows, India's strong economic fundamentals, expanding domestic investor base, and policy measures continue to provide stability to the country's capital markets.
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