In a single day on Friday, FIIs raised Rs. A massive withdrawal of 20,637 crores was made. What was the reason for this sharp exit?

Foreign portfolio investors (FPIs) emerged as heavy sellers in Indian equities on Friday, losing Rs. 20,637 crore, recording one of the steepest single-day selloffs in recent years, as markets reeled from the impact of the recent MSCI index rebalancing.

Prior to this, the steepest decline occurred last month (April 2, 2026), when FIIs in a single day lost Rs. 19,837 crore was withdrawn, data from ACE Equity shows.

The sell-off came as the benchmark indices fell 1.5%, with market participants attributing late-session weakness to passive fund flows tied to index shifts. The scale of foreign investors’ activity was seen not only because of the outflow figures, but also because of the sheer volume of trade during the session.

NSE’s Rs. 287,452 crore out of the total turnover of FPIs accounted for Rs. 198,465 crore in trading activity, representing about 69% of the day’s traded value, provisional data on the NSE showed.

Despite ending the day as net sellers of Rs 20,637 crore, FPIs traded around 9.6 times the amount during the session. In comparison, Domestic Institutional Investors (DIIs) received Rs. 16,260 crore were net buyers and Rs. 53,772 crore total deals were recorded, or about 3.3 times their net purchase value.

The high participation prompted questions about whether the activity was driven solely by MSCI-related portfolio adjustments or whether high-frequency trading (HFT) strategies amplified volume around index rebalances. The size of the turnover also fueled debate over how much of the reported foreign outflows reflected real portfolio repositioning and could be related to short-term trading activity.

Nilesh Shah, MD, Kotak Mahindra Asset Management, questioned whether the increase in activity was a surprise as Indian equities are currently not a key focus area for FPIs. He also asked whether Friday’s volumes were driven entirely by the MSCI rebalancing or whether high-frequency trading (HFT) activity around the index’s turnaround fueled turnover. Shah further expressed surprise that Rs. How much of the reported net FPI outflow of Rs 20,637 crore can be attributed to HFT trades?

Market expert Gurmeet Chadha also questioned the sharp increase in trading volume and argued that ‘speed and money muscle’ was being used to distort market movements. He highlighted the addition of 31,000 short contracts even as Brent crude hovered around $90 a barrel and hopes of a weekend deal persisted. Calling the activity suspicious, he said ‘we need to catch this cartel’.

According to Abhilash Pajaria, Head of Alternative and Quantitative Research at NuvamaWealth, due to rebalancing around Rs. There was an outflow of 8,000-8,500 crores. He said the figure was slightly higher than previous reviews due to free-float adjustments in stocks like Bajaj Finance, HUL and TCS, which he described as a one-time adjustment arising from the new methodology.

MSCI Rejig

In MSCI’s latest review, Federal Bank, MCX, NALCO and Indian Bank were added to the MSCI Standard Index, while Hyundai Motor India, Jubilant FoodWorks, Kalyan Jewelers and RVNL were removed. The changes took effect at the close of business on May 29.

The review also resulted in weightage increases for Adani Power, BPCL, Nykaa, Trent and OFFS. Despite the reshuffle, India’s overall weighting in the MSCI benchmark index remained broadly stable at around 12.3% compared to 12.4% previously. The total number of Indian constituents in the index also remains unchanged at 165.

Outside of the standard index, MSCI announced a comprehensive overhaul of its small cap index. According to Nuwama, more than a dozen Indian stocks were excluded, reducing the number of India stocks from 474 to 459. New additions include IREDA, Anthem Bioscience, Fractal Analytics, Pine Labs and Emmvee Photovoltaic, while Xtra Healthcare for Cello World, RedTap, Raymond Lifestyle, Indigo Paints and BlueCellCare.

Index review days typically witness elevated volumes as passive funds tracking the MSCI benchmark match their holdings with revised composition.

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