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Below the Quote on Weekly FPI Flows by Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth

*Equity Flows*: Play-rewind-play

The final four sessions of September and the first session of October – only intensified the mood. FPIs sold ?35,860 crore of Indian equities during September, according to settled depository data, reversing the buying seen in July and August. The contrast with provisional exchange data of ?44,013 crore of net selling in September highlights the familiar time gap between exchange-reported trade-settled data.

So, across the four sessions from 28 September to 1 October, provisional equity selling was about ?34,965 crore, while settled equity selling for the corresponding reported activity was about ?27,962 crore. Foreign selling accelerated sharply into the month-end and carried into October.

This secondary-market selling versus primary-market buying (?8,551 crore) suggests that foreign investors are not simply switching off India; they are becoming much more selective about where they deploy capital, a trend likely to continue into October.

On the other hand, domestic institutional flows for September 2026 provided a significant counterweight to the FPI sell-off. DIIs bought ?76,030 crore in the cash equity market during September, provisional NSE data showed.

In other words, FPIs appear happy to sell the neighbourhood but are still willing to buy a new apartment in it.

*Debt Flows*: Debt is not escaping the FPI rethink either

FPIs sold debt worth ?5,049 crore in this week and September settled data showed FPI outflows of approximately ?5,247 crore from the general debt limit, ?5,049 crore through VRR and ?10,431 crore through FAR, with hybrid outflows of about ?2,078 crore.

The FAR outflow at ?10,602 crore according to CCIL data, was the highest monthly outflow in six months. The key driver has been the sharp rise in US Treasury yields, which has narrowed the India-US 10-year yield differential and reduced the relative attraction of Indian government bonds

These data points indicate that the current foreign allocation shift is not an equity-market phenomenon alone.

*Why the continued selling?*

It’s the same geopoliconomic issues for India. The same three major variables that continue to dominate the conversation: oil, US yields and the rupee – an unpleasant cocktail for foreign investors.

Crude prices have remained elevated (Brent-$100+) amid continuing geopolitical tensions and concerns around supply through the Middle East. For India, higher oil is particularly uncomfortable because it simultaneously raises the import bill, inflation risks and pressure on the currency.

At the same time, the US 10-year Treasury yield at 5.34%, its highest level since 2002, has materially raised the opportunity cost of emerging-market investments. A stronger dollar and a weaker rupee (around ?96.32 on 1 October) further reduce dollar-denominated returns for foreign investors. Reuters has also highlighted the vulnerability of Indian bonds and the rupee to high oil prices and elevated global yields.

*Now, let’s add the fourth variable*: portfolio rotation. With global investors finding attractive opportunities in dollar assets and parts of the Asian technology heavy markets, India has had to compete harder for incremental foreign capital – the significantly reduced “non-AI” trade.

*The silver lining, if there is one*: the selling continues to look more like global asset-allocation and risk management than a wholesale loss of confidence in India’s underlying domestic growth story.

Solution to the “equity return + currency return + US Treasury yield + portfolio allocation” equation does not seem to be in sight immediately. And, unfortunately, there’s no “make this painless” button on dealing screens either.

*What to watch next week?*

The most important event is the RBI Monetary Policy Committee meeting from October 5–7, with the policy decision on October 7. A Reuters poll showed around 60% of economists expecting a 25-bps hike, amid rising inflation, crude prices and rupee pressure.

*For FPI flows, the key signals to watch are*:

• RBI's October policy and guidance on inflation, liquidity and the rupee

• Brent crude: whether it stays above $100 or retreats

• US 10-year yield and dollar index

• USD/INR: particularly the market's response around ?96

• India's PMI and macro data

• IPO subscriptions and new listings, where foreign participation has remained comparatively resilient

• US monetary-policy expectations, especially after the latest US jobs data showed payroll growth of just 29,000 in September, against expectations of around 90,000, while unemployment rose to 4.2%. The weaker than expected number has reduced expectations of an October Fed hike and could provide some relief to global bond yields.

*_For now, the foreigners may have brought the rain, but domestic liquidity is still carrying the umbrella. The question is whether the RBI can help clear the skies_.*

*The views are personal*. Data points are referenced from publicly available information, internal sources and other third-party sources believed to be reliable. While every care has been taken to ensure veracity of data, however, the writer cannot guarantee the accuracy of such information, assure its completeness, or warrant that such information will not be changed. The information in this report may include inaccuracies or typographical errors.

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