Foreign investors have withdrawn Rs 88,180 crore (roughly $9.6 billion) from Indian equities so far this month, pressured by escalating Middle East tensions, a weakening rupee, and growing concerns over high crude oil prices and their impact on India's growth and corporate earnings.
The exodus marks a sharp reversal from February, when foreign portfolio investors (FPIs) injected Rs 22,615 crore — the highest monthly inflow in 17 months — pushing total 2026 outflows past the Rs 1 lakh crore mark.
FPIs have been net sellers on every trading day in March up to March 20, offloading Rs 88,180 crore in the cash market. While significant, the figure still falls short of the record monthly outflow of Rs 94,017 crore seen in October 2024.
What's Driving the Sell-Off?
Analysts point to a mix of global and domestic headwinds. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said the primary trigger has been the sharp escalation in Middle East tensions, with fears of a prolonged conflict and potential disruption to the Strait of Hormuz pushing Brent crude past $100 per barrel — fuelling a classic risk-off move among investors.
Khan added that the selling has been compounded by the rupee hovering near Rs 92 against the dollar, elevated US bond yields, profit-booking after February's inflows, and a mixed Q4 earnings outlook signalling margin pressure in key sectors.
Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, highlighted rising US Treasury yields as another key driver. Higher yields have made dollar-denominated assets more attractive, pulling capital away from emerging markets like India — a shift typically accompanied by a stronger dollar and tighter global liquidity.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, echoed these concerns, noting that weakness in global equity markets, rupee depreciation, and fears over high crude prices have all weighed heavily on investor sentiment.
Which Sectors Were Hit Hardest?
Financial services bore the biggest brunt, with FPIs selling shares worth Rs 31,831 crore in the fortnight ended March 15.
What Lies Ahead?
The near-term outlook remains cautious. Khan warned that further oil price volatility or geopolitical escalation could sustain outflows, though any signs of de-escalation, strong domestic institutional investor (DII) support, or positive earnings surprises could help stabilise markets and spark selective buying.
Vijayakumar believes a meaningful reversal in FPI flows is unlikely until geopolitical tensions ease and broader market stability returns.
Disclaimer: This article is for informational and educational purposes only. The views and opinions expressed are those of the individual analysts and their respective organisations, and do not constitute investment advice. Readers are advised to consult a SEBI-registered investment advisor before making any financial or investment decisions.
