Foreign Investors Sell $2.1 Billion in Indian Stocks This Month, But a Reversal May Be Coming

Foreign investors have been selling Indian stocks at a rapid pace, with outflows totaling $2.1 billion in December alone. However, recent trends suggest that this selling spree may be coming to an end, with net outflows narrowing to just $35 million this week.

Moderation in Selling

In the last three sessions, foreign investors have bought Indian equities worth $420 million, including purchases of $255 million on Friday. This moderation in selling has sparked hopes of a potential reversal in 2026, with some analysts predicting a strong comeback for Indian stocks.

Expert Insights

V K Vijayakumar, Chief Investment Strategist at Geojit Investments, believes that the buying is a reversal of foreign investors' trend towards the close of 2025. Despite selling in the secondary markets, Vijayakumar notes that foreign investors have remained invested in domestic equities via the primary markets.

The FII outflows and trade deficit have had a sustained adverse effect on the Indian rupee, which has been the worst-performing currency in Asia, falling nearly 5% in 2025. However, the last two days have seen a reversal of the currency depreciation, with the rupee bouncing back from a low of 91.14 to the dollar on December 16 to 89.29 on December 19.

Positive Outlook

Vijayakumar remains positive about foreign investors returning to India in 2026, backed by steady GDP growth and improving corporate earnings growth. After a strong inflow of $2.05 billion in October, November saw a sell-off worth $525 million.

The year opened on a sharply negative note, with foreign investors pulling out a massive $1.63 billion during the January–March quarter. However, with the recent moderation in selling and the potential for a reversal, Indian stocks may be poised for a comeback in 2026.

Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple sources before making any investment decisions.