Foreign investors are still selling India — Here's why

Foreign institutional investors (FIIs) continued to pull money out of Indian equities, as global capital increasingly chased artificial intelligence (AI)-linked opportunities in other Asian markets.

According to JM Financial, FIIs were net sellers worth Rs 68,870 crore in April 2026. "In Apr'26, FIIs were net sellers to the tune of Rs 68,870 crore ($7.3 billion). FIIs remained net sellers in Apr'26 following record net selling in Mar'26, which marked the highest monthly net FII outflow in absolute terms. The primary market posted net FII inflows of Rs 2,300 crore (versus inflows of Rs 3,000 crore in Mar'26), whereas the secondary market saw net FII outflows of Rs 71,200 crore (versus outflows of Rs 1.29 lakh crore in Mar'26)," the brokerage said.

"FII ownership as a percentage of total Indian equities has fallen from 19.9 per cent in Apr'16 to 14.7 per cent in Apr'26 -- its lowest level since Jun'12. DII ownership as a percentage of total Indian equities has risen over the years, reaching 18.9 per cent in Mar'26," it added.

FIIs buy primary market despite secondary selloff

The brokerage highlighted that while FIIs have remained sellers in the secondary market, they have continued to invest in India's primary market over the past year.

"Over last 12 months, FIIs net buyers in primary and net sellers in secondary markets: Over the last 12 months, Indian primary markets clocked FII net inflows of Rs 72,200 crore ($8.2 billion), whereas secondary markets logged FII net outflows of Rs 3.41 lakh crore ($37.3 billion)," JM noted.

BFSI leads sectoral outflows

JM Financial said the banking and financial services space witnessed the largest foreign outflows during the period. "Sectors with the highest outflows were BFSI ($3,280 million), Services ($827 million), Pharma ($737 million), O&G ($711 million), Auto ($583 million), Telecom ($467 million), IT Services ($445 million), FMCG ($343 million) and Realty ($227 million)," the brokerage highlighted.

Why are FIIs selling India?

Some market experts said a combination of macroeconomic concerns and the absence of a strong AI-led investment theme in India has weakened foreign investor sentiment.

"FIIs have been in a selling mode over the past one year, and the selling has been accentuated in the last six months. Factors such as India's heavy dependence on crude oil imports, pressure on the rupee, and the absence of a strong AI/technology theme have weighed on sentiment. Long-only FIIs are also staying on the sidelines at this point until there is greater clarity on India's growth prospects," said Kranthi Bathini, Equity Strategist at WealthMills Securities.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said global investors are increasingly allocating money to AI-driven markets in Asia.

"A significant trend in FII flows this year is that Japan, South Korea and Taiwan are attracting significant inflows, while India and some other emerging markets, which are facing headwinds from the energy crisis and currency depreciation, are facing outflows. An important factor driving capital flows is the AI trade, particularly in South Korea and Taiwan," he said.

He added, "Two companies in South Korea - Samsung and SK Hynix- and one in Taiwan- TSMC- are attracting the lion's share of these inflows. The excellent results being posted by these companies are providing the fundamental support to the FII flows into these markets. So long as the AI trade continues, the trend of FII outflows from India is likely to continue. However, there are concerns of overvaluation in AI stocks."