What happened to FPI flows in June 2026?
Foreign portfolio investors (FPIs) continued to be net sellers of Indian equities in June 2026 for the third straight month. In other words, FPIs sold more Indian shares than they bought in June 2026, as they did in the previous two months.
According to the data released by the National Securities Depository Ltd (NSDL), FPIs’ net outflows from Indian stocks amounted to Rs 49,340 crore in June 2026 compared to Rs 60,847 crore in April 2026 and Rs 32,963 crore in May 2026.
In this blog, I’ll dig deeper into why this happened. Let’s first talk about what happened between the US and Iran in June 2026.
US & Iran signed an interim peace agreement
The US and Iran signed an interim peace agreement on June 17, agreeing on a 60-day ceasefire and reopening of the Strait of Hormuz.
This development brought relief to almost everyone in the world. The price of Brent oil futures declined from $92.58 per barrel at the beginning of June to $72.95 on June 30.
Due to the escalating tensions between the US and Iran, the price of Brent oil futures had reached $118.35 per barrel on March 31.
The fact that it declined to $72.95 on June 30 is good news for the Indian economy. This is due to India’s excessive dependence on imports for its crude oil requirements. In FY 2026, India imported more than 90% of its crude oil needs.
Even though crude oil’s price massively declined in June, FPIs’ net selling of Indian shares was more in June than in May.
In May, when the average Brent oil futures’ price was $102.8 per barrel, FPIs’ net selling of Indian equities amounted to Rs 32,963 crore. But in June, when the average Brent oil futures’ price declined to $83.9 per barrel, FPIs’ net selling of Indian equities actually increased to Rs 49,340 crore. Why did it happen?
Timing of the US-Iran deal is extremely important
The US-Iran deal was signed on June 17. From June 1 to 16, FPIs were net sellers of Indian equities to the extent of Rs 62,435.5 crore. From June 17 to 30, they were net buyers to the extent of Rs 13,095 crore.
Clearly, the sentiment of FPIs towards Indian stocks improved after the agreement was signed.
Indian Rupee (INR) gained marginally against the US Dollar (USD) during the month
The USD/INR exchange rate moved from 94.89 at the beginning of June to 94.6 by the end of June. This shows that INR gained 0.3% vis-à-vis USD during the month.
That said, by June 30, INR had lost around 4.9% of its value against USD since the beginning of the calendar year 2026.
A depreciating INR is not good for FPIs’ investments in India. Suppose an FPI gains 10% in dollar terms on its investment, but INR declines by 4% against USD; then its returns in USD terms will be only 6%.
Moreover, the US 10-year yield remained on the higher side in June. The yield on a 10-year US government bond was 4.42% at the end of June compared to 4.47% at the beginning of June.
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While the yields moderated a bit during June, they still remained high compared to their levels earlier in the year. For example, the yield on a 10-year US government bond stood at 3.93% at the beginning of March.
When yields are higher in the US, it makes sense for investors to invest in US assets compared to emerging-markets’ assets. This could be another reason why the INR/USD exchange rate continued to remain under pressure.
FPIs massively increased their investments in debt instruments in India in June
While FPIs were net sellers in equities, they were net buyers of Indian debt instruments in June. Their net inflows in Indian debt in June 2026 amounted to Rs 55,518 crore.
This is the highest net inflows in debt by FPIs in a month in 2026 so far. For the sake of comparison, FPIs’ net inflows in Indian debt stood at a mere Rs 2,757 crore in May 2026. In fact, in April 2026, FPIs were net sellers of Indian debt to the extent of Rs 10,826 crore.
Why did FPIs increase their investment in Indian debt in June when the INR-USD exchange rate remained low, and US 10-year yields were on the higher side?
The major reason behind this is the tax reforms announced by the Central Government regarding FPI investments in government securities.
In addition, to improve the participation of FPIs in Government Securities, the Central Government has taken a decision to expand the list of specified securities under the Fully Accessible Route (FAR).
As a result of these announcements, FPIs’ investments in Indian debt increased considerably in June.
Equity valuations remained high
The valuations of Indian stocks remained on the higher side in June 2026. The price-to-earnings (P/E) multiple of the benchmark Nifty 50 was 20.07 at the beginning of June. By the end of June, the P/E had increased a bit to 20.58.
The article further notes that the underperformance of the Indian equities vis-à-vis other emerging markets did not start with the war between the US and Iran.
Ever since September 2024, the Indian stock market has been dealing with slowing growth and expensive valuations.
Conclusion
June 2026 was better than earlier months for the Indian market. This is because the Middle East tensions appeared to be easing, causing the price of oil to decline.
Besides, the Central Government introduced reforms to encourage FPI investments. That said, the valuation of Indian equities remained on the higher side compared to other emerging markets.
In my view, it’s important for Indian companies to grow their earnings at a high rate to attract FPI investments in equities.
