Record USD 19.7 Billion FPI Outflows Hit Indian Equities In FY26: SEBI

New Delhi, Aug 10 (KNN) India's financial markets are expected to remain supported by resilient domestic economic fundamentals in 2026-27, although geopolitical uncertainty, elevated commodity prices and volatile foreign capital flows could pose risks, according to the Securities and Exchange Board of India's (SEBI) Annual Report 2025-26.

Strong Domestic Fundamentals Support Economic Growth

SEBI said the Indian economy remained resilient during 2025-26 despite a challenging global environment, supported by strong domestic demand, government capital expenditure and the services sector. Real GDP growth was estimated at 7.7 percent in 2025-26, up from 7.1 percent in the previous year.

Private consumption and investment remained key growth drivers, accounting for 56.7 percent and 31.9 percent of nominal GDP, respectively, reported ANI.

The report cited the International Monetary Fund's projection of 6.5 percent growth for India in 2026-27, compared with global growth of 3.1 percent. Fiscal consolidation, improving inflation dynamics, stronger corporate balance sheets and resilient domestic institutional investment are expected to support India's relative economic performance.

Geopolitical Tensions And Oil Prices Pose Risks

However, SEBI flagged risks from geopolitical tensions and higher energy prices. A prolonged Middle East conflict and crude oil prices above USD 100 per barrel could widen the current account deficit and increase inflationary pressures.

Foreign Outflows Weigh On Indian Equities

Indian equities faced a challenging 2025-26, with the Nifty 50 and broader indices declining by around 14 percent in US dollar terms. The decline was attributed to sustained foreign portfolio investor (FPI) selling, rupee depreciation, valuation concerns, slower earnings growth and geopolitical tensions.

FPI equity outflows from India reached a record USD 19.7 billion during the year. However, strong investment flows from domestic institutional investors, particularly mutual funds, provided support to the market.

SEBI said global supply-chain restructuring could create fresh investment opportunities for India. It added that a sustained resolution of the Middle East conflict and a normalisation of energy prices could support a recovery in foreign investment flows.

Crude Prices Remain Key Macroeconomic Concern

Higher crude prices remain a key macroeconomic risk, as they could increase India's import bill, widen the current account deficit and add to inflationary pressures. 

Strategic petroleum reserves, import diversification and targeted fiscal measures are expected to remain important for maintaining macroeconomic stability.

Overall, SEBI said India's relatively strong domestic fundamentals provide support to financial markets, while their performance in 2026-27 will remain closely linked to geopolitical developments, global commodity prices and international capital flows.

(KNN Bureau)