Foreign Portfolio Investors Retreat from Indian Markets Amid Rising Geopolitical Tensions
Can FPIs return to Dalal Street soon? Nithin Kamath outlines the roadblocks
Mint
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Foreign portfolio investors (FPIs) are withdrawing from the Indian stock market due to geopolitical risks, high valuations, and unfavorable tax changes. Nithin Kamath, co-founder of Zerodha, highlights that investor interest has significantly waned, with FPIs selling over ₹1.77 lakh crore in FY26, surpassing total outflows from 2025.
- 01FPIs have withdrawn ₹1.77 lakh crore in FY26, exceeding 2025's total outflows.
- 02Nithin Kamath cites geopolitical risks and high valuations as major concerns for investors.
- 03Investors are shifting focus to markets like Japan, Taiwan, and Europe.
- 04The increase in securities transaction tax has made India less attractive to FPIs.
- 05The ongoing tensions in West Asia are contributing to a risk-averse sentiment among investors.
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Foreign portfolio investors (FPIs) are significantly retreating from the Indian stock market, having sold over ₹1.77 lakh crore (approximately $21.4 billion USD) in FY26, surpassing total outflows of ₹1.66 lakh crore (about $19.9 billion USD) in 2025. Nithin Kamath, co-founder of Zerodha, pointed to several structural issues dampening foreign interest, including geopolitical risks, high valuations, and unfavorable tax changes. He noted that investor sentiment has 'pretty much died out,' with many now looking towards markets in Japan, Taiwan, and Europe. The recent increase in the securities transaction tax (STT) has further diminished India's appeal compared to other markets. In March 2026 alone, FPIs withdrew a record ₹1.17 lakh crore (around $14.1 billion USD), reflecting an average daily outflow of ₹6,198 crore (approximately $746 million USD). Analysts warn that ongoing tensions in West Asia could lead to further earnings cuts, clouding the outlook for the Indian stock market.
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The significant withdrawal of FPIs could lead to increased volatility in the Indian stock market, potentially affecting stock prices and investor confidence.
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