Foreign portfolio investors pulled out Rs 21,831 crore from Indian equities in the past week across four trading sessions, influenced by worsening global risk sentiment related to the West Asia conflict. This withdrawal followed a robust February, during which FPIs injected Rs 22,615 crore into Indian stocks, marking the highest monthly inflow in 17 months. Prior to this positive trend, foreign investors had been net sellers for three consecutive months, withdrawing Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November.
Domestic institutional investors (DIIs) continued to offer support in March by infusing around Rs 32,786 crore, supported by consistent SIP flows and sustained domestic involvement. Market experts linked the March sell-off to escalating geopolitical tensions following strikes by the US and Israel on Iran. These actions raised concerns about potential supply disruptions through the Strait of Hormuz, leading to Brent crude surpassing $90 a barrel.
The sell-off was also attributed to Qatar’s energy minister Saad al-Kaabi’s warning that a prolonged conflict in the Middle East could prompt Gulf exporters to declare force majeure, resulting in delivery halts and pushing oil prices to $150 a barrel and natural gas to $40 per MMBtu within weeks. Analysts pointed out the rupee’s decline below the 92-per-dollar mark and the surge in US Treasury yields, which attracted capital towards safe-haven assets.
Rising oil prices pose risks to inflation, the current-account deficit, and currency stability, potentially impacting foreign investor sentiment towards emerging markets. Analysts predict that FPIs are unlikely to resume as net buyers until there is more clarity on the geopolitical landscape. Despite global uncertainties, economic indicators in India remained largely positive. The country’s GDP expanded by 7.8% in Q3 FY26 under the revised base series, an improvement from 7.4% a year earlier. Additionally, GST collections in February surged by 8.1% year-on-year to over Rs 1.83 lakh crore, reflecting stable economic activity. However, industrial growth moderated, with the IIP slowing to 4.8% in January from 7.8% in December.
