Foreign Institutional Investors (FIIs) have intensified their retreat from the Indian market, offloading equities worth ₹22,530 crore in just the first 16 days of January 2026. This aggressive selling follows a record-breaking 2025 where FIIs withdrew over ₹1.66 lakh crore, the highest annual outflow ever recorded in India.
The persistent selling has turned the “winter of 2026” into one of the harshest starts for Dalal Street in a decade, with the Nifty 50 and Sensex both declining nearly 2% since the start of the year.
Why are FIIs Selling?
Market analysts point to a “perfect storm” of global and domestic triggers:
- The “Tariff Tension”: The primary dampener is the ongoing uncertainty regarding a US-India trade deal. Recent threats of a 50% additional tariff on India due to Russian oil purchases—which Washington claims helps fund the war in Ukraine—have spooked foreign investors.
- Currency & Yield Pressure: The Indian Rupee hit a record low of 90.78 against the US dollar on January 16. Combined with rising US bond yields, the “dollar-carry trade” has become less attractive, prompting a flight of capital back to the US.
- The “AI Trade” Pivot: Much of the global liquidity that was previously in emerging markets is being redirected into the US-led AI boom, leaving Indian valuations—still considered “stretched” by some—vulnerable to corrections.
- Earnings Caution: While some large-cap IT firms (like Infosys) reported better-than-expected Q3 results, the broader market is cautious about mixed corporate earnings and the upcoming Union Budget in February.
The “DII” Cushion
While FIIs are in a “sell-everything” mode, Domestic Institutional Investors (DIIs) are actively buying the dip to prevent a total market collapse.
| Category | Activity (Jan 1–16, 2026) | Trend |
| FII (Secondary Market) | ₹22,530 Crore Sold | Net Sellers on 11/12 days |
| DII (Mutual Funds/Banks) | ₹34,076 Crore Bought | Continuous Buying |
| Rupee (USD-INR) | 90.78 (Record Low) | Down ~5% in 12 months |
Market Impact: A Decade-Worst Start
The Nifty 50 has already broken its short-term uptrend, testing a medium-term support level near 25,600. Financial experts warn that if the 25,600 level is decisively broken, the index could slide toward 25,300 or lower.
“India is currently catching a cold because the world has a fever. Until there is a resolution on the ‘Tariff’ word, we are likely to remain range-bound with a negative bias.” — Chakri Lokapriya, CIO-Equities.
Conclusion: Looking Toward the Budget
All eyes are now on the February 2026 Union Budget. Investors are hoping for significant capital expenditure (Capex) announcements and potential tax reforms that could act as a “positive trigger” to bring foreign flows back. For now, the strategy among top fund managers is “wait-and-watch,” prioritizing quality large-caps over speculative mid-caps
