FPI Dynamics: Navigating Investment Volatility Amid AI Surge

FY26 saw volatile foreign portfolio investment (FPI) flows, with a net outflow of USD 3.9 billion due to trade uncertainties, the rupee depreciation, and AI market shifts. Despite the negative sentiment in Indian equities, domestic institutional investors provided a stabilizing force.

Foreign Portfolio Investment (FPI) flows in FY26 were marked by a significant outflow, totaling USD 3.9 billion as of December 2025, primarily due to economic uncertainties and shifts in capital towards AI-centric markets like the US, Taiwan, and Korea, according to the Economic Survey 2025-26.

The survey highlighted that FPIs became net sellers of Indian securities between April and December 2025, primarily offloading equities, citing the underperformance of Indian markets, trade policy uncertainties, and a general global risk-averse sentiment exacerbated by high US bond yields.

Despite these challenges, the survey projected a positive outlook for debt market FPI inflows, supported by regulatory easements and ongoing trade talks. Meanwhile, domestic institutional investors stepped up, mitigating volatility with continued investment in the Indian equity market.

(With inputs from agencies.)