After investing in Indian equities for two consecutive months, foreign investors turned net sellers in the first week of September, pulling out ₹7,443 crore as a rebound in crude oil prices, rising U.S. bond yields, and a firm dollar dented risk appetite.

The outflow came after foreign portfolio investors (FPIs) infused ₹30,919 crore in August and ₹20,200 crore in July. Before that, they remained net sellers for four straight months from March to June.

With the latest withdrawal, total outflow by foreign portfolio investors from Indian equities has climbed to ₹2.32 lakh crore so far in 2026, surpassing the ₹1.66 lakh crore withdrawn in 2025.

Rajkumar Rathi, Chief Investment Officer at YES Securities, said the recent selling was driven by a rebound in crude oil prices, raising concerns over India’s inflation and current account outlook.

“Further strengthening U.S. bond yields and a firm dollar index have reduced foreign risk appetite for emerging markets,” he said.

Mr. Rathi also pointed to India’s premium equity valuations, particularly in growth sectors and the mid- and small-cap segments, as factors prompting foreign funds to book profits and rebalance portfolios.

However, he said foreign investor appetite for India’s primary market has remained “structurally resilient”.

Looking ahead, global bond yields are likely to remain a key driver of FPI flows, V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, said.

Brent crude prices, evolving U.S.-Iran geopolitical tensions and upcoming U.S. inflation data ahead of the Federal Reserve’s mid-September policy meeting will also influence foreign fund flows, said Pabitro Mukherjee, Deputy Vice President-Research at Bajaj Broking.

Foreign investors also extended their selling to the debt market. They withdrew ₹377 crore through the Fully Accessible Route (FAR) and ₹231 crore through the Voluntary Retention Route (VRR), while investing ₹217 crore through the general route.