Foreign investors withdraw Rs 88,180 crore in March; yearly outflows exceed Rs 1 lakh crore

Foreign investors have pulled out Rs 88,180 crore (about USD 9.6 billion) from Indian equities so far in March, amid escalating tensions in West Asia, a weakening rupee and concerns over the impact of elevated crude oil prices on India’s growth and corporate earnings.

The sell-off follows a strong rebound in February, when foreign portfolio investors (FPIs) invested Rs 22,615 crore, marking the highest monthly inflow in 17 months, according to NSDL data.

With the latest withdrawals, total FPI outflows have crossed the Rs 1 lakh crore mark so far in 2026.

In March (till March 20), FPIs have remained net sellers on every trading day, offloading equities worth Rs 88,180 crore in the cash market. However, the outflow remains lower than the record monthly sell-off of Rs 94,017 crore recorded in October 2024.

Market participants attributed the sustained selling to global macroeconomic pressures and geopolitical uncertainty.

Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said the primary trigger has been the sharp escalation in Middle East tensions, with fears of prolonged conflict and possible disruption to the Strait of Hormuz pushing Brent crude above USD 100 and triggering a risk-off move.

He said the trend has been exacerbated by the rupee hovering near Rs 92 against the US dollar, elevated US bond yields, profit-booking following February inflows, and a mixed Q4 earnings outlook indicating margin pressures in key sectors.

Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, said rising US Treasury yields are another key driver.

Higher yields have increased the attractiveness of dollar-denominated assets, leading to capital moving away from emerging markets such as India. This shift is typically accompanied by a stronger dollar and tighter global liquidity, further affecting sentiment towards emerging market equities.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said the conflict in West Asia has intensified FPI selling.

He said weakness in global equity markets, continued rupee depreciation and concerns over the impact of high crude prices on India’s growth and earnings have weighed on investor sentiment.

Sectorally, financial services saw the highest outflows, with FPIs selling shares worth Rs 31,831 crore during the fortnight ended March 15.

Analysts said the near-term outlook remains cautious.

Khan said continued volatility in oil prices or further escalation in geopolitical tensions could sustain outflows. However, signs of de-escalation, strong support from domestic institutional investors (DIIs), or positive earnings surprises may help stabilise markets and trigger selective buying.

Vijayakumar said a reversal in FPI flows is likely only when geopolitical tensions ease and broader market stability returns.

(With inputs from agencies)