Foreign Investors Flee Indian Equities Amid Rising Bond Yields and Firm Dollar

Foreign investors pulled out Rs 7,443 crore from Indian equities in the first week of September after investing for two consecutive months. This marks a rebound in crude oil prices, rising US bond yields, and a firm dollar that has dented risk appetite.

Rajkumar Rathi, Chief Investment Officer at YES Securities, said this recent selling was driven by concerns over India's inflation and current account outlook due to the rebound in crude oil prices. He also pointed to strengthening US bond yields and a firm dollar index reducing foreign risk appetite for emerging markets.

India's premium equity valuations, particularly in growth sectors and the mid- and small-cap segments, are another factor prompting foreign funds to book profits and rebalance portfolios, according to Rathi. However, he noted that foreign investor appetite for India's primary market has remained 'structurally resilient'.

The total outflow by foreign portfolio investors from Indian equities has climbed to Rs 2.32 lakh crore so far in 2026, surpassing the Rs 1.66 lakh crore withdrawn in 2025.