Foreign portfolio investors (FPIs) pulled out a record $17.5 billion from Indian shares in 2025, but several signs point to a possible comeback in 2026.
What drove the massive outflow?
Weak earnings growth, heightened global risk aversion and a shift toward AI‑focused markets led investors to sell Indian equities, the biggest annual outflow ever on a dollar basis.
Why 2026 could be different
Analysts see three key reasons for a potential rebound:
- Improving earnings outlook: Nifty‑50 earnings are expected to grow about 16% CAGR from FY26‑FY28, double the pace of the prior two years.
- Reasonable valuations: Indian stocks trade at attractive multiples compared with many emerging and developed markets.
- Stable macro environment: GDP growth near 7.5%, low inflation, a current‑account deficit under 1% of GDP and a steady rupee reduce the risk of sudden shocks.
AI exposure remains a headwind
Global capital is chasing AI‑heavy sectors in the US, Taiwan and East Asia. India is still more of an AI consumer than a producer, which could keep some investors away from Indian tech and export‑oriented stocks.
Which Indian sectors may still shine?
Capital‑intensive, domestic‑focused areas could benefit:
- Banking and financial services
- Infrastructure and construction
- Consumer‑goods and retail
Conversely, technology services, traditional exporters and heavily weighted index stocks might face relative neglect if they lack clear AI monetisation stories.
What retail investors can watch
Steady inflows from mutual funds, systematic investment plans (SIPs), and retirement schemes (EPFO/NPS) are likely to support the market, even if foreign money moves more cautiously.
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.