Foreign investors continued to pare their exposure to Indian equities, withdrawing ₹27,048 crore so far this month, indicating cautiousness among global investors amid an evolving global macroeconomic and geopolitical environment.

With this, total outflows by Foreign Portfolio Investors (FPIs) from the equity market have reached ₹2.2 lakh crore in 2026, higher than the ₹1.66 lakh crore pulled out during the entire 2025, according to data with the NSDL.

FPIs were net sellers in all months of 2026, except February. They withdrew ₹35,962 crore in January before turning net buyers in February, when they invested ₹22,615 crore, the highest monthly inflow in 17 months.

However, the trend reversed in March, when foreign investors pulled out a record ₹1.17 lakh crore. The selling continued in April with net outflows of ₹60,847 crore and extended into May with withdrawals of over ₹27,000 crore so far.

Himanshu Srivastava, principal - manager research at Morningstar Investment Research India, said the latest outflow trend reflected persistent uncertainty surrounding global growth, elevated geopolitical tensions across key regions and volatility in crude oil prices, which continued to weigh on risk appetite towards emerging markets, including India.

He added that a stronger U.S. dollar and elevated U.S. bond yields remained key drivers behind the selling activity, as higher returns in developed markets improved the relative attractiveness of safer assets and prompted investors to adopt a more defensive stance.

Mr. Srivastava further said concerns over the trajectory of global inflation and uncertainty regarding the pace and timing of future interest rate cuts by major central banks continued to influence capital allocation decisions globally.

Geojit Investments chief investment strategist V.K. Vijayakumar said sustained FPI selling, coupled with a widening current account deficit, has exerted pressure on the rupee.

"At the beginning of the year, the rupee was at 90 to the U.S. dollar. On May 15, it breached the 96-mark to touch 96.14," he said.

Mr. Vijayakumar said the rupee could weaken further if FPI outflows persist and crude oil prices remain elevated. He also noted that the continuing flow of capital into artificial intelligence-focused companies globally has led to some diversion of funds away from markets such as India, which are seen as lagging in the AI space.

"This trend could reverse when the AI trade, which appears to be in bubble territory, eventually cools off," he added.