The Reason FIIs Have Sold Indian Equities for 24 Straight Sessions — and Why DIIs Are Absorbing Every Rupee

Dalal Street vendors have stopped making headlines because the selling has been so consistent. The foreign desks have been hitting the sell button every morning for the past twenty-four sessions. Around lunchtime, stroll past the BSE building on Dalal Street. The customary group of brokers by the chai stall hardly ever glance up at the screens. The design is now used as wallpaper.

Foreign institutional investors withdrew approximately ₹1.98 lakh crore from Indian secondary markets between January and the end of April, which is already close to the total withdrawal of 2025. On paper, it’s an astonishing number, but the indices haven’t crashed as that scale of selling would have once ensured. Both the Nifty and the Sensex are down roughly 14% and 13%, respectively, but neither has broken through. There’s a feeling that something has subtly changed beneath.

There is no mystery surrounding the reasons why foreigners are departing. In terms of dollars, US ten-year yields that are parked above 4% offer something akin to a free lunch. Returns have been eaten up by the rupee, which is dragging itself close to 95, before they have even reached a Bloomberg terminal in Singapore. Crude prices above $100 rekindle long-standing concerns about inflation, India’s import bill, and the RBI’s flexibility. The exit becomes more of a calculation than a verdict when you consider valuations that, up until recently, appeared stretched in comparison to nearly every Asian peer.

The money’s disappearance is striking. In terms of dollars, Taiwan’s market has increased by about 40% this year. The Kospi in South Korea has increased by 62%, which is nearly embarrassing to say aloud. China is up 7% and Japan is up 18%.

The AI capital expenditure cycle and the chipmakers that supply it—TSMC, Samsung, and SK Hynix—are at the center of a narrative that global capital has determined it must own. India no longer appears to be the clear choice it was eighteen months ago, as its IT services behemoths are genuinely concerned about how generative AI will change their core business.

Hemant Sood of Findoc Investmart stated, “Capital is not leaving Asia, it is rotating within it,” which is arguably the most accurate description of the situation. Indian IT is currently on the losing side of the AI trade, according to Vikas Gupta of OmiScience Capital. That view could change. Usually, it does. However, money is moved first by perceptions, which are corrected later.

The portion of the story that doesn’t fit into earlier textbooks is the other half. Nearly 90% of the foreign sales have been absorbed by domestic institutional investors. The majority of the work has been done by SIP flows, that monotonous monthly drip from millions of salaried Indians. For the first time in recorded history, DII ownership of the Nifty 500 has surpassed FII ownership (20.9% versus 17.1%). It’s difficult to ignore the symbolism. Pune, Indore, and Coimbatore are increasingly holding up the market, which was previously driven by decisions made overnight in New York or London.

The outflow, according to Aditya Agrawal of Avisa Wealth Creators, is risk-averse behavior that will run out once the dollar weakens and earnings visibility increases. Agnam Advisor’s Prashant Mishra advised investors not to mistake FII selling for declining fundamentals. Both may be partially or entirely correct. Seldom do markets render clear-cut decisions.

The foreigners’ return date and level of aggression are still unknown. India currently trades at a P/E of about 21, compared to about 25 in other Asian markets; this discount did not exist six months ago. In the second half of the year, that disparity might cause capital to decline. Or it might not. The answer doesn’t seem to matter as much as it once did.