BFSI, Oil & Gas lead FPI selling thrust in first half of May 2026

FPI SECTORAL SELLING DRIVEN BY BFSI AND OIL

While the selling continued, May 2026 saw the intensity of selling tapering. March and April saw over $5 billion of selling in the first fortnight. In comparison, the FPI equity selling was just $2.82 billion in the first fortnight of May 2026. However, the FPI selling continued to be focused on the BFSI and oil segment. RBI response to rising inflation is not too clear; so, FPIs may prefer to wait and watch. The FPI equity AUC (assets under custody) fell further to $702 billion as of the end of May 2026, while the overall AUC of equity and debt tapered to $775 billion; sharply lower than September 2024 peaks.

Data Source: NSDL

FPI TRIGGERS: WHY THE SELLING IS STILL PERSISTING?

• While the geopolitical risk may be reducing, India has a big mountain to climb in assuring crude supplies at a reasonable cost, since Russian prices too have gone up.

• With the Strait of Hormuz still in a state of flux, supply chains for oil, gas, and other oil derivatives were severely impacted; hitting Indian economy quite hard

• With the cut in MSCI India weightage and the big shift to better performing markets like Taiwan and Korea, India portfolio flows are really starting to feel the heat

• A new risk in terms of monetary policy uncertainty has also arisen as the FPIs are not too clear how the RBI will handle the twin challenges of inflation and falling rupee.

SECTORAL FPI FLOWS IN MAY 2026 (FIRST FORTNIGHT)

While FPIs were net sellers of $2.82 billion in H1-May, the FPI equity AUC as well as the overall FPI AUC saw a fall in value in May 2026 to the tune of nearly 4-5% over April.

• Let us start with the BFSI sector that saw net selling of $1.87 billion in first fortnight of May 2026. It was again the low-hanging fruit for FPIs, and hence susceptible.

• Oil & gas stocks saw heavy selling by FPIs in the first fortnight of May on fears that the rising subsidy gap could start hitting profits of downstream oil companies.

• Selling in telecom was fairly heavy, but that can be attributed to FPIs cutting exposure to Bharti Airtel ahead of the share swap of Airtel Africa shares.

• Defensives like IT, FMCG and consumer durables saw net combined selling of $461 million as purchasing power continues to raise serious questions for FPIs.

• On the positive side, services sector saw net inflows of $732 million, largely on account of their ability to withstand trade constraints much better.

• Capital goods continued to see net inflows from FPIs of $276 million, largely on the back of revival in domestic investment and rebuilding demand from the Gulf.

For the FPIs, the key factor continues to be the very vulnerable Indian Rupee, which dipped to a low of ₹96.97/$ during the week. Unless the rupee shows credible signs of bottoming out, FPIs may prefer to remain on the sell side of Indian equities!