Are FIIs really exiting India? What’s the real deal?

Debasis Mohapatra

Bengaluru, 24 March 2026

Foreign Institutional Investors (FIIs) are selling Indian equities without any respite. Since the beginning of this year, several events have prompted such move. Firstly, the US’ imposition of punitive 50% tariff and uncertainty over trade deal with the US influenced FIIs’ decision to pull out money from India. As that issue settled down, the Middle East war is forcing FIIs to square off position in Indian stock market. In the meantime, relative better performance of other Asian markets like China and South Korea has also played a role in FIIs pulling out. Of course, rupee depreciation against dollar is the most important driver of such selling. So far this year, data from the National Securities Depository Limited (NSDL) showed that FII selling has exceeded Rs 1 lakh crore in the first three months of 2026. With Brent crude crossing $110 per barrel, rupee is likely to be under pressure. This may intensify the FII selling more in coming days. However, it can also turn for better if dynamics change.

FII Cash Sale: March 16 to 20, 2026:

• These are FII Cash Net sale data and not cash provisional data.
• Source: TrendLyne

But, this popular narrative of FIIs existing India is one part of the story. Let’s look at several other metrics, which point out that FIIs may be deploying cash somewhere else or simply sitting on cash in India.

What is happening in the debt market?

While FIIs are selling in equities as indicated by FII Cash data points, debt instruments have witnessed positive flows in recent weeks.

FII Net Debt Purchase:

(Data Source: TrendLyne)

These data points indicate that while FIIs are selling in equities, debt inflow has increased during this time and previous period.

Part of global bond indices:

Significant developments had happened in the past years with regard to the bond market. Indian bonds have been included in JP Morgan GBI-EM & Bloomberg EM Local Currency Government Index in the last two years. Through such inclusion, India has already captured around $27 billion of FII inflows into Govt bonds. Though Bloomberg has deferred the inclusion into Bloomberg Global Aggregate Index, whenever that happens will attract substantial amount of FII flows into Indian Govt bonds.

The FII Debt flow for the last six months showed that there was no panic selling. Rather, the trend remained mixed.

Source: TrendLyne (The figures in bracket are selling in the bond market by FIIs)

Forex Reserve stays healthy:

Forex reserve fell to $709.759 billion, a decline of $7.05 billion on the week ended March 21, 2026. However, reports indicated that most of the fall might have emanated from the Reserve Bank of India’s intervention in defending the rupee against the US dollar. Logically, when FIIs have pulled out around Rs 1 lakh crore since January, the forex reserve fall should have been sharp. But India maintains a healthy forex reserve despite the last two weeks fall. Some analysts pointed out that FIIs existing equity positions, are not fully repatriating the money to native countries or other attractive markets. Rather, there is a possibility that FIIs are parking their money in Special Rupee Vostro Accounts (SRVAs). Given the easing of norms by the Reserve Bank of India for FPIs (Foreign Portfolio Investors) to invest their rupee-denominated money in SRVAs in Government securities and T-Bills among others; this can be a distinct possibility.

Therefore, the narrative of FIIs existing India is partially true as a portion of the funds invested back in G-Secs and debt mutual funds among other instruments. Whether such trend will continue is a difficult question to answer at this point of time, but India as a market remains attractive for many FIIs despite its relative underperformance since last year.