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India's 2025 FII Exodus: Record Selling Sets Stage for 2026 Inflow Rebound

Foreign Institutional Investors executed record net selling in India during 2025, driven by high valuations and a shift toward global "AI trade" opportunities. This massive outflow contributed to significant rupee depreciation. However, analysts forecast a strategic shift for 2026, anticipating net FII inflows due to India's robust GDP growth and improving corporate earnings prospects. Meanwhile, Domestic Institutional Investors provided a crucial counterbalance, with inflows in 2025 already surpassing the full-year 2024 total.

Key Points: India FII Outflows 2025: Why 2026 May See Net Inflows

  • Record FII selling in 2025
  • Elevated valuations & AI trade drove exits
  • Strong GDP growth to attract 2026 inflows
  • DIIs provided crucial market support
2 min read

After record selling last year, India's strong fundamentals to attract net FII inflows in 2026

Record FII selling hit India in 2025, but analysts predict a 2026 rebound driven by strong GDP growth and improved corporate earnings.

"The year 2026 is likely to witness some changes in the FII strategy. - Dr. VK Vijayakumar, Geojit Investments"

New Delhi, Jan 3

The year 2025 saw record foreign institutional investor selling in India but significant improvement in the country's fundamentals is likely to attract net FII inflows in 2026, analysts said on Saturday.

In the month of December, FIIs sold equity worth Rs 30, 332 crore through the exchanges. This takes the total FII selling through the exchanges in 2025 to Rs 240,193 crore.

FIIs have bought or invested equity for Rs 73,909 crore through the primary market, taking the total net sell figure for 2025 to Rs 166,283 crore, as per NSDL data.

"This is the worst selling by FIIs since they started investing in India. In 2024 also, FIIs have been selling through the exchanges. They sold equity for Rs 121,210 crores. However, for the year as a whole, the net FII inflow was positive since they had invested Rs 121,637 crore through the primary market. But for 2025, the net sell figure is a massive Rs 166,283 crore," said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.

The relatively elevated valuations in India and the 'AI trade' were the principal factors that pushed the FIIs to sell mode in India.

The sustained selling by FIIs have contributed significantly to the sharp depreciation of 5 per cent in the rupee vs the dollar in 2025.

"The year 2026 is likely to witness some changes in the FII strategy," Vijayakumar mentioned.

Robust gross domestic product (GDP) growth and prospects of improvement in corporate earnings in 2026 augur well for positive FII flows in 2026, said analysts.

On the other hand, domestic institutional investors (DIIs) did some heavy buying last year to offset the FII outflows.

A recent Motilal Oswal Financial Services Ltd report said that DIIs recorded robust inflows of $8.7 billion in the month of November, marking their 28th consecutive month of buying.

In 2025 (year to date), DII inflows hit $81.3 billion, already surpassing the full-year 2024 levels, it added.

- IANS

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Reader Comments

P
Priya S
The record selling is worrying, especially the impact on the rupee. My husband's import business is feeling the pinch. Let's hope the analysts are right about 2026. We need that foreign investment for job creation and infrastructure projects.
V
Vikram M
Respectfully, I think we should be cautious with such predictions. "Strong fundamentals" is a phrase thrown around too easily. Corporate earnings need to genuinely improve for FIIs to return in a big way. The government must focus on easing compliance to attract long-term capital, not just hot money.
R
Rohit P
DIIs buying $81.3 billion is the real story here! 🚀 It shows the growing confidence of Indian money in Indian markets. We are becoming less dependent on the whims of foreign funds. This is true Aatmanirbharta in the financial sector.
S
Sarah B
Interesting read. From an outside perspective, India's growth story remains compelling despite the sell-off. The shift to domestic institutional support is a healthy development for market maturity. The 2026 inflow prediction seems plausible if global risk appetite improves.
K
Karthik V
Bhai, market toh correction de raha tha isiliye bech diya unhone. Ab valuations reasonable honge, wapas aa jayenge FII. Ye to cycle chalta rehta hai. Main to SIP jari rakhoonga. Long term ke liye India hi best hai.

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