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Escalating geopolitical tensions and economic concerns trigger a record outflow of foreign investment from Indian equities in March, impacting market stability.
Illustration: Dominic Xavier/Rediff
Key Points
- Foreign investors pulled out a record Rs 1.14 lakh crore from Indian equities in March, marking the worst monthly outflow.
- Escalating tensions in West Asia, a weakening rupee, and concerns over high crude oil prices are key factors driving the FPI exodus.
- The total FPI outflow has reached Rs 1.27 lakh crore so far in 2026, according to NSDL data.
- Elevated US bond yields and tightening global liquidity have made developed market fixed income more attractive, contributing to the selling pressure.
- Indian market valuations, while corrected, remain relatively high compared to other emerging markets, prompting profit booking.
Foreign investors have pulled out Rs 1.14 lakh crore (about $12.3 billion) from domestic equities in March, making it the worst monthly outflow, weighed down by escalating tensions in West Asia, a weakening rupee and concerns over the impact of elevated crude oil prices on India’s growth.
With one trading session still remaining in the month, the outflows could extend further.
The previous record for the highest monthly exodus stood at Rs 94,017 crore in October 2024.
With the latest withdrawals, total foreign portfolio investors (FPIs) outflow has reached Rs 1.27 lakh crore so far in 2026, according to NSDL data.
As per the data, FPIs have remained persistent sellers throughout March, offloading equities worth Rs 1,13,380 crore in the cash market till March 27.
The sharp sell-off follows a strong rebound in February, when foreign FPIs pumped in Rs 22,615 crore, the highest monthly inflow in 17 months.
Factors Behind the Outflow
Market participants attributed the sustained selling pressure to global macroeconomic headwinds and heightened geopolitical uncertainty.
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee, fears of decline in remittances from the Gulf region and concerns surrounding the impact of high crude prices on India’s growth and corporate earnings contributed to the sustained selling by FPIs.
Additionally, the selling has been driven by a combination of elevated US bond yields and tightening global liquidity, which have improved the relative attractiveness of developed market fixed income, Himanshu Srivastava, Principal – Manager Research at Morningstar Investment Research India, said.
While Indian market valuations have corrected alongside the recent market decline, they continue to remain relatively elevated compared to several emerging market peers, which may still be prompting selective profit booking and reallocation, he added.
Moreover, FPIs were sellers in other emerging markets, too, like Taiwan and South Korea.
There is a risk-off trend in equity markets globally after the war broke out in West Asia.
