Foreign portfolio investors (FPIs) have begun 2026 with restraint, extending last year’s selling streak by pulling out Rs 7,608 crore (USD 846 million) from Indian equities in the first two trading sessions of January.

The early outflow comes on the back of a difficult 2025, when FPIs withdrew a record Rs 1.66 lakh crore (USD 18.9 billion) from the market.

The sell-off was driven by volatile currency movements, global trade tensions, concerns over possible US tariffs and stretched equity valuations.

Persistent foreign selling also played a role in the nearly 5 per cent fall of the rupee against the dollar last year.

Despite the cautious start, market participants see scope for a change in direction as the year progresses. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, believes foreign investors may rethink their stance as domestic conditions improve.

“The year is likely to witness a shift in FPI strategy, as improving domestic fundamentals may start attracting net foreign inflows,” he said. “A robust GDP growth and the prospects of a recovery in corporate earnings bode well for positive FPI flows in the coming months.”

Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, echoed this view, pointing to external and domestic factors that could support sentiment.

“Normalisation in India-US trade relations, a benign global interest rate environment and stability in the USD-INR pair could create a favourable backdrop for foreign investors,” he said.

Khan added that equity valuations now appear more comforting compared to last year, which could help revive interest. For now, the data tells a different story.

According to NSDL, FPIs sold nearly Rs 7,608 crore worth of Indian equities between January 1 and 2.

Khan noted that this pattern is consistent with past behaviour, as foreign investors have remained guarded in January, pulling out funds in eight of the last ten years.

Going ahead, FPI flows are expected to stay sensitive to global cues and macro developments.