According to NSDL data, in February Foreign Portfolio Investors (FPIs) invested Rs. 22,615 crore was invested, the highest monthly inflow in 17 months.
With recent withdrawals, the total FPI outflows in 2026 so far will be Rs. 1 lakh crore mark has been crossed.
In March (till March 20), FPIs have been net sellers on every trading day, with the cash market selling Rs. 88,180 crore worth of offloading equities. However, the outflow seen in October 2024 was Rs. 94,017 crore, still short of the record monthly exodus.
Market participants attributed the continued selling pressure to global macroeconomic headwinds and heightened geopolitical uncertainty.
The primary trigger is a sharp rise in Middle East tensions, with fears of a prolonged conflict and a possible disruption in the Strait of Hormuz pushing Brent crude above USD 100, fueling a classic risk-off move, said Waqarjaved Khan, senior fundamental analyst at Angel One.
He added that against the US dollar, the rupee stood at Rs. Moving closer to 92, the trend has been exacerbated by rising US bond yields, profit-booking after the February outflows and a mixed Q4 earnings outlook showing margin pressure in key sectors.
Himanshu Srivastav, principal manager research at Morningstar Investment Research India, said rising US Treasury yields are another key driver.
Higher yields have improved the relative attractiveness of dollar-denominated assets, prompting capital to flow away from emerging markets such as India. The shift is typically accompanied by a stronger dollar and tighter global liquidity, further dampening sentiment toward emerging market equities.
Echoing similar concerns, VK Vijayakumar, chief investment strategist at Geojit Investments, said conflict in West Asia has intensified FPI selling.
He noted that weakness in global equity markets, continued depreciation of the rupee and concerns over the impact of higher crude prices on India’s growth and earnings weighed on investor sentiment.
During the fortnight ended March 15, FPIs raised Rs. Sector-wise, financial services bore the brunt of the sell-off, with shares offloading to the tune of Rs 31,831 crore.
Looking ahead, analysts expect the near-term outlook to remain cautious.
Khan said continued volatility in oil prices or a further rise in geopolitical tensions could sustain outflows. However, any signs of de-escalation, strong support from domestic institutional investors (DIIs) or positive earnings surprises could help stabilize the market and trigger selective buying.
According to Vijayakumar, FPI inflows are likely to reverse only when geopolitical tensions ease and broader market stability returns.
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