Net foreign selling, at about ₹1.54 lakh crore, is the highest for a calendar year, as slowing growth, pricey valuations and a declining rupee exacerbated the risk-off sentiment. Local institutions – led by pension schemes and mutual funds (MFs) flush with monthly inflows from a swelling retail investor base – remained resilient buyers, pouring ₹7.7 lakh crore into the market this year. This led to domestic institutions’ ownership of Indian companies surpassing that of overseas investors in March, with the gap only widening during the rest of the year.
“Foreign selling in Indian equities can be attributed to global investors preferring other markets on a relative basis,” said Sriram Velayudhan, senior vice president, IIFL Capital Services. “Factors like lacklustre earnings, tariff overhang and a weak currency, apart from valuations, kept them away.”
The Sensex and Nifty advanced 9.7% and 8.4%, respectively, to briefly touch all-time highs.
MFs Provide Big Boost
However, they still underperformed various other markets in Asia and the Emerging Markets basket including China, Brazil and Taiwan, which have gained between 26% and 34% so far this year. That said, but for domestic institutional flows, Indian stocks could have ended up in losses.
“The unprecedented SIP (systematic investment plan) inflows this year have supported the weak markets despite the aggressive foreign sell-off,” said Velayudhan.
Equity MFs received net flows to the tune of Rs 3.22 lakh crore, which found its way both to secondary and primary markets, helping many companies raise money through initial public offerings (IPOs).
“Domestic investors are not as comfortable with ETF-based buying for investing in commodities like gold and given the limited takers for real estate and overseas investing, equity emerges as the only option,” said Siddarth Bhamre, head of research, Asit C Mehta Intermediates.
Overseas investors adopted different playbooks for secondary and primary markets in 2025. In the secondary market, they sold shares to the tune of Rs 2.28 lakh crore, while ploughing Rs 74,000 crore into the booming IPO market, which raised an unprecedented Rs 1.75 lakh crore, marking the highest level of equity capital mobilisation on record.
“The quantum of foreign inflows in the primary market in context of the overall flows is low and is expected to be the buying based on deals while the larger IPOs seem to have attracted foreign interest,” said Bhamre. “Overall, they remained bearish on India as it was the worst-performing market in Asia.”
The last time that Indian equities faced the heat of a foreign sell-off was in 2022, when they offloaded shares worth Rs 1.2 lakh crore (primary and secondary). After record inflows of Rs 1.3 lakh crore in 2023 in the secondary market, the tide turned significantly in October 2024 when global investors pulled out over Rs 1 lakh crore, the highest monthly exit. In 2025, they remained sellers in seven months and buyers in five.
The quantum of selling by overseas investors is expected to ease in 2026. They may even turn buyers in the New Year if the India-US trade deal is sealed and the rupee rebounds.
“Historically, periods of high foreign selling were followed by them turning buyers and the same can’t be ruled out in 2026,” said Velayudhan.
Bhamre said that no major foreign selling is expected in 2026, and global investors are expected to turn buyers. “But these investors are not in a hurry, so the buying may be gradual,” he said.
