FII flows 2026: Foreign investors extend selling streak in early sessions; analysts expect turnaround later this year

Foreign institutional investors (FIIs) have begun 2026 on a cautious note, continuing their selling streak in Indian equities after a bruising 2025. In the first two trading sessions of the new year, FIIs sold shares worth Rs 7,608 crore, extending a trend that saw heavy outflows through December, as per ET.FIIs were net sellers throughout December, offloading Indian equities worth Rs 22,611 crore during the month. This took the total foreign outflow for 2025 to Rs 1,66,286 crore. According to market participants, the scale of sales last year was unprecedented. V K Vijayakumar, chief investment strategist at Geojit Investments, described 2025 as the worst phase of FII selling since overseas investors began investing in Indian markets, reported ET.He noted that during the calendar year 2025, FIIs sold equities worth Rs 2.40 lakh crore in the secondary market. However, investments of Rs 73,909 crore through the primary market helped soften the overall impact. Even so, December alone saw secondary market selling of Rs 30,332 crore, underlining the persistent pressure on equities.Explaining the reasons behind the sustained exit, Vijayakumar pointed to relatively high valuations in India and the global shift towards artificial intelligence-linked trades as key drivers. He also said the relentless selling contributed to weakness in the rupee. The Indian currency emerged as the worst-performing major currency in 2025, depreciating nearly 5% against the US dollar over the year, as per ET.A closer look at quarterly flows shows how uneven FII behaviour was during the year. Foreign investors pulled out Rs 1,16,574 crore in the January–March quarter, setting a sharply negative tone. This was followed by a brief reversal in April–June, when inflows stood at Rs 38,673 crore. Despite the weak start to 2026, market experts believe the outlook could improve over the year. Vijayakumar expects a shift in FII strategy as India’s fundamentals strengthen. “Significant improvement in India’s fundamentals are likely to attract net FII inflows in 2026. Robust GDP growth and prospects of improvement in corporate earnings in 2026 augur well for positive FII flows in 2026,” he said, as quoted by ET.Nilesh Jain, head vice president – equity research at Centrum Broking, also struck an optimistic note. He expects 2026 to be better than the previous year and has pegged the Nifty’s December 2026 target at 29,731, implying a potential upside of 13%. He attributed this view to improving macro indicators, stronger GDP growth, easing inflation and an end to corporate earnings downgrades.Jain added that India underperformed global emerging markets in 2025, delivering its weakest relative performance in three decades. Rupee depreciation, persistent FII selling and high US tariffs of 50% weighed on sentiment, with no trade deal reached by year-end.