Indian equity markets experienced significant foreign selling in the first quarter of 2026, which was balanced out by strong domestic buying, according to a report. Foreign institutional investors (FIIs) were major net sellers from January to March 2026, with the highest quarterly outflow of the fiscal year at Rs 1,31,122 crore. In contrast, domestic institutional investors (DIIs) provided substantial support with net inflows of Rs 2,44,052 crore during the same period.
The first quarter of 2026 saw the highest quarterly FII sell-off of the fiscal year due to factors such as global market uncertainty, elevated US bond yields, dollar strength, and cautious sentiment across emerging markets. Despite this, FII outflows decreased by around 34% year-on-year to Rs 2,64,819 crore in FY26 from Rs 4,03,581 crore in FY25, while DII inflows surged by approximately 47% to Rs 8,43,206 crore from Rs 5,71,959 crore.
The report highlighted the resilience of Indian markets in the face of global uncertainty, as strong DII inflows more than compensated for sharp FII outflows. In May 2026, FII selling amounted to Rs 30,374 crore, bringing the total FII selling for the year to Rs 2,22,343 crore, surpassing the total sell figure of Rs 1,66,283 crore for 2025.
Analysts suggested that the stabilization of the rupee and improved prospects for earnings growth could attract foreign institutional investors (FIIs) back to Indian stock markets. Reasons for sustained selling included poor earnings growth in India, better earnings growth in other markets, high US bond yields, and rupee depreciation, according to a Jefferies report.
