Foreign outflows thin down on healthier cues in June

Mumbai: Overseas investors slowed selling of Indian equities in June, with monthly outflows on track to be the lowest in this year’s selling months as easing crude oil prices and receding geopolitical tensions helped improve sentiment. February was the only month in 2026 when foreign investors were net buyers.

Since the US and Iran reached an initial agreement to reopen the Strait of Hormuz on June 15, foreigners have been buyers in seven out of the eight trading sessions.

Foreign portfolio investors sold shares worth ₹31,823 crore so far in June, the lowest monthly outflow since ₹31,381 crore in December 2025, according to StockEdge. In February, they bought ₹12,950 crore of equities. “Easing oil prices on receding geopolitical tensions in West Asia led to the foreign sell-off abating to some extent,” said Riddhiman Jain, managing director and head of investment strategy and solutions, Waterfield Advisors.

Earnings on WatchJain said the slew of measures taken by RBI to support the rupee also caused the reduction. He said the rally in semiconductor and AI stocks in South Korea and Taiwan lost momentum in June as valuation concerns emerged.

Foreign investors had withdrawn more than Rs 1.15 lakh crore from Indian equities in March, the largest monthly outflow on record, following the February 28 outbreak of war, which pushed oil prices sharply higher.Selling moderated in June after a tentative peace deal eased concerns and crude prices retreated, helping the Nifty gain 2.2%. Domestic institutional investors, meanwhile, bought shares worth Rs 76,156 crore in June, marking the 35th consecutive month of their monthly purchasing spree.Analysts said the decline in oil prices has reduced one of the biggest headwinds for India, but sustained foreign inflows will depend on stronger earnings and economic growth.”Until overseas investors continue to prefer other markets over India, and there is a slowdown in that rally, no major foreign inflows are expected,” said Siddarth Bhamre, head of institutional research at Asit C Mehta. “The impact on inflation is likely to subsidise but there has to be earning visibility, which is missing. Barring some small inflows, a revival in foreign sentiment is not expected.”

So far this year, foreigners have been net sellers to the tune of nearly Rs 2.90 lakh crore, the highest ever in a year, after pulling out Rs 2.39 lakh crore the previous year. The Nifty is down 8%.

“India can emerge as a good value story in this backdrop, especially while geopolitical clouds are waning. However, overseas flows tend to follow price momentum rather than lead it,” said Jain of Waterfield. “Once markets demonstrate sustained outperformance versus the past two years, that is typically when allocators rotate back into India.”

Domestic investors have remained resilient, although SIP inflows declined in May, signalling some fatigue after two to three years of muted returns. “SIP inflows for May also declined, indicating that some investors are losing patience,” said Bhamre.

Jain said global investors are likely to remain in wait-and-watch mode, with first quarter earnings serving as the key test. “While a runaway rally is not expected, the bias has turned positive,” he said. “After two to three years of tepid returns, there is some exhaustion that has set in among domestic investors, as reflected in the reduction in SIP inflows. While the flows have tapered, this is not a concern currently.”