Foreign investors have sharply increased their selling of Indian equities in September, with cumulative outflows reaching about ₹33,864 crore by September 29. The selling has accelerated in the final week of the month as higher crude oil prices, elevated US Treasury yields and continued geopolitical uncertainty weigh on global risk appetite.

The latest data also shows a growing divergence between foreign and domestic investors. While foreign institutional investors (FIIs) have remained heavy sellers, domestic institutional investors (DIIs) have continued to absorb shares, providing support to the Indian market.

FII selling accelerates at the end of September

Foreign investors sold ₹9,980.22 crore worth of Indian equities on September 29, marking their largest single-day outflow in nearly six months. The previous comparable high was on March 23, when foreign investors sold around ₹10,414 crore.

The September 29 selling also became the fifth-largest single-day FII outflow of 2026. FIIs sold ₹3,693.93 crore on September 25 and another ₹5,353.22 crore on September 28, showing a sharp increase in selling during the final trading sessions of the month.

Across September, FIIs have been net sellers in 15 of the 20 trading sessions. Their cumulative selling has reached roughly ₹33,864 crore, making September the largest monthly foreign outflow in six months.

Oil prices add to pressure on Indian equities

The increase in foreign selling comes as crude oil remains elevated.

Brent crude was around $105 a barrel on September 29, while the US 10-year Treasury yield moved above 5.27%, reaching its highest level in 19 years. Higher US yields can make dollar-denominated assets more attractive to international investors and reduce the relative appeal of emerging-market equities.

For India, elevated oil prices carry an additional significance because of the country's dependence on imported crude. A prolonged increase in energy costs can raise the import bill and add pressure to inflation, the rupee and corporate margins.

These concerns have coincided with a broader decline in Indian equities. The Nifty 50 has fallen by nearly 6% over the previous seven weeks, while the September decline has pushed the benchmark close to six-month lows.

Domestic investors provide a counterweight

Domestic institutional investors have moved in the opposite direction.

On September 29, DIIs bought ₹6,952.71 crore of Indian equities, partially offsetting the ₹9,980.22 crore foreign outflow. DIIs have remained net buyers during all 20 trading sessions of September, with cumulative purchases of around ₹64,759 crore during the month.

This has created a significant gap between foreign and domestic flows. While overseas funds have been reducing their exposure, domestic institutions have continued to put money into equities, helping absorb some of the foreign selling pressure.

On a year-to-date basis, FIIs have recorded net selling of approximately ₹3.93 lakh crore, while DIIs have bought around ₹6.28 lakh crore, based on the same exchange data.

IT and financial stocks remain under pressure

The selling has also been reflected across sectors.

On September 29, 13 of 16 major sectoral indices ended lower. Banking stocks declined 0.4%, while the Nifty IT index fell 1.5%. Mid- and small-cap stocks also remained under pressure, with the Nifty Midcap 100 falling 0.8% and the Smallcap 100 declining 1%.

The broader weakness came as the Sensex declined 242.65 points, or 0.33%, to 72,529.07, while the Nifty fell 64.05 points, or 0.28%, to 22,716.20 on Tuesday. Both indices had already declined sharply during the previous session.

The market also experienced significant intraday volatility during the monthly derivatives expiry, with the Nifty's indicative closing level briefly falling much more sharply before recovering.

September ends with several global pressures

The latest FII figures come at a time when Indian markets are dealing with several interconnected global factors.

Crude oil remains above $100 a barrel, US Treasury yields are elevated and geopolitical uncertainty continues to influence global capital flows. These conditions can affect the relative attractiveness of emerging-market equities while also creating pressure on India's import costs and currency.

At the same time, domestic institutional buying has provided an important source of liquidity. The contrast between sustained FII selling and strong DII buying has become one of the defining features of India's current market environment.

As September draws to a close, the direction of foreign flows will remain closely linked to movements in crude oil, US bond yields, the rupee and global risk sentiment. For Indian equities, the balance between continued overseas selling and domestic institutional demand will be an important factor as the market enters October.

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