FIIs Selling Pressure: Will lower STT and capital gains tax bring foreign investors back?

FII April Data 2026: Foreign Institutional Investors (FIIs) have been selling in Indian markets for several months, market expert Anil Singhvi said. He said this continued dollar outflow has become an important factor for both the markets and the broader economy.

Singhvi said the key concern is whether this selling pressure can be stopped and whether foreign investment can return to India in a sustained manner. He said the trend of FII selling is not limited to a short period but has been seen over several months, which is adding to market uncertainty.

He said the movement of foreign funds is closely linked to global conditions as well as domestic factors. According to him, India continues to remain an important investment destination, but global allocation decisions are currently influencing flows.

Valuations and global returns

Singhvi said one of the reasons for selling could be valuations, but he added that Indian markets are not considered expensive at present. He said valuation alone does not fully explain the sustained outflows seen in recent months.

He said better returns in other global markets, such as the United States and Korea, are attracting investors. According to him, global investors are reallocating money towards markets where short-term returns appear stronger. This is also affecting emerging markets, including India.

He said global risk appetite and comparative performance of markets play a key role in foreign investment decisions.

Currency movement and taxation impact

Singhvi said currency weakness is another important factor affecting sentiment. He said when the rupee weakens, foreign investors see a reduction in actual returns when converted into their home currency, which impacts inflows.

He also said taxation is an area of concern. He pointed to higher taxes, such as Securities Transaction Tax (STT) and capital gains tax. He said in many global markets, such taxes are lower or do not exist, which makes them more attractive for foreign investors.

According to him, tax structure is one of the elements that can influence long-term capital allocation decisions by global funds.

Tax rationalisation suggested to improve inflows

Singhvi suggested that reducing taxes like STT and capital gains tax could help improve investor sentiment. He said such steps may help reduce FII selling pressure and could also support fresh inflows into Indian markets.

He said any rationalisation in tax structure would not only benefit foreign investors but could also improve sentiment among retail investors. According to him, a more favourable tax environment could support overall market stability.

He added that improved investor sentiment may help strengthen India’s position in global capital markets.

FPIs record heavy outflows in April 2026

Foreign Portfolio Investors (FPIs) remained net sellers in April 2026 with total outflows of about Rs 76,209 crore, according to NSDL data. The selling pressure was seen across both equity and debt segments during the month.

FPIs withdrew Rs 63,501 crore in the first half of April (April 01–15) and another Rs 12,708 crore in the second half (April 16–30), indicating sustained selling throughout the month.

Sector-wise, Financial Services recorded the highest outflow at Rs 38,598 crore. Oil, Gas and Consumable Fuels saw an outflow of Rs 6,701 crore, while Consumer Services recorded Rs 5,907 crore.

Healthcare saw outflows of Rs 5,290 crore, while Automobiles and Auto Components recorded Rs 5,523 crore. Information Technology saw an outflow of Rs 4,212 crore, and Telecommunication recorded Rs 4,400 crore.

FMCG saw an outflow of Rs 3,295 crore, while Real Estate recorded Rs 2,332 crore. Moderate outflows were also seen in Construction, Construction Materials, Chemicals and Consumer Durables.

On the other hand, some sectors saw buying interest. Power recorded a net inflow of Rs 5,609 crore, while Capital Goods saw an inflow of Rs 4,829 crore. Metals and Mining recorded an inflow of Rs 968 crore, supported by buying in the second half of the month.