FPIs net sell $(1.47) billion of Indian stocks in first fortnight of Sep-26

FPIs TURN NET SELLERS IN FIRST HALF OF SEPTEMBER

If the first fortnight of July and August had seen combined net FPI buying of $3.36 billion, the month of September saw FPIs revert to their selling ways. With the euphoria of FCNR(B) flows done and dusted, FPIs are focusing more on the geopolitical risk and the downstream impact of crude above $105/bbl. Indian rupee continued to remain weak.

FPI equity AUC (assets under custody) fell sharply to $703 billion as of mid-September 2026, while overall AUC of equity and debt combined bounced to $783 billion. Both are down nearly -5% compared to the previous month. If you compare with the peak AUC of September 2024, the FPI AUC as of Sep-2026 is nearly -25% down in value.

Data Source: NSDL

WHY FPIS TURNED NET SELLERS IN SEPTEMBER 2026 FIRST HALF

• The Fed rate hike of 25-bps was already factored in, which eventually did happen in the September Fed meet. This puts pressure on the RBI to also hike rates in October, which could have negative implications for bond prices and equity valuations.

• India inflation continues to be elevated, touching 4.82% in August. The consumer inflation is expected to stay above 5% till the end of 2026. That would not only put pressure on RBI to hike rates, but also impact the real GDP growth.

• FPIs have also been concerned that rupee could edge towards ₹100/$ over the next few quarters. While the FCNR(B) flows provided temporary relief, it has created a huge potential dollar outflow in terms of redemption and hedging costs for RBI.

• Crude oil has been another major X-factor keeping FPIs away from India. During the month of September, Brent Crude has consistently stayed between $100/bbl and $110/bbl. Considering India’s 88% reliance on crude imports, that is an overhang.

To encapsulate, the FCNR(B) flows have been a double-edged sword. In terms of FPI sentiments towards India; it has not really made any significant difference.

SECTORAL FPI FLOWS IN SEPTEMBER 2026 (FIRST FORTNIGHT)

FPIs were net sellers of $(1.47) billion in H1-September 2026, which is evidenced by the fact that 14 out of the 23 sectors listed by NSDL saw net FPI selling in the period.

• BFSI and Autos saw combined net selling of $(925) million by FPIs in H1-Sep. These are the 2 sectors likely to be most impacted by a hike in rates, which looks inevitable with rising inflation; and the Fed also hiking rates by 25-bps.

• Oil & Gas saw net FPI selling of $(249) million, largely on account of rising crude prices and its possible impact on profit margins of oil market companies (OMCs).

• FMCG sector saw net selling of $(211) million, as higher crude oil prices squeezed the margins of end-user segments like paints, detergents, toiletries etc.

• Among the other major sectors that witnessed selling; power and telecom saw combined net selling of $(275) million, amidst growing concerns among the global investors about a possible slowing of the capital investment cycle in India.

• Gross selling in Indian equities in the first fortnight of September 2026 stood at $(2.01) billion; triggered by rate hike risks, higher oil prices, and slowing capex. The gross buying value was just 26.9% of the gross selling value in this period.

• On the buy side, Healthcare saw net buying of $220 million as a defensive bet and a patent expiry play; while consumer services continued to attract buying attention. Construction also saw buying on hopes of a revival in infrastructure demand.

The AI/IT cross-trade had shown signs of reversing in the last 2 months, which led to FPI buying in July and August. However, with the euphoria of FCNR(B) over, the FPIs are back to focussing on immediate problems like crude oil and rupee volatility!