Foreign Investors Pull Record $12 Billion From Indian Stocks in March Amid War Concerns

Foreign Investors Pull Record $12 Billion From Indian Stocks in March Amid War Concerns​

Historic Outflows Signal Weakening Sentiment Toward Indian Equities​

Foreign investors are exiting Indian equities at an unprecedented pace in March, with net outflows nearing $12 billion, marking what is set to be the steepest monthly withdrawal on record.

According to Bloomberg-compiled data, overseas investors have sold a net $11.7 billion worth of Indian shares through March 25. This has pushed total foreign outflows for 2026 beyond $13 billion, approaching levels seen during the previous year.

The sharp pullback reflects a broader global shift away from riskier assets, intensified by rising geopolitical tensions and surging energy prices.

Energy Shock and Weak Fundamentals Weigh on Markets​

Elevated energy costs have added pressure on oil-importing economies like India, worsening existing concerns among global investors. Even before the ongoing conflict, Indian markets were grappling with multiple headwinds, including a weak rupee, modest earnings recovery, and relatively high valuations.

The surge in oil prices has compounded these challenges, further dampening investor sentiment.

Market participants indicate that the lack of a strong near-term growth narrative is making it difficult for India to attract sustained foreign inflows, even if geopolitical tensions ease.

Global Brokerages Turn Cautious on India​

Major global financial institutions have revised their outlook on Indian equities. Goldman Sachs, Morgan Stanley, and UBS Global Wealth Management have all lowered their expectations.

Goldman Sachs recently downgraded Indian markets, citing concerns that prolonged elevated energy prices could negatively impact the country’s growth trajectory.

Broader Emerging Market Sell-Off Intensifies Pressure​

The shift away from Indian equities is part of a larger trend across emerging Asia. Since the onset of the Iran war, global funds have withdrawn approximately $52 billion from emerging Asian markets excluding China. This puts the region on track for its largest monthly outflow since 2009.

Despite this broader trend, India has experienced particularly sustained selling pressure. Over the past two years through March, foreign investors have pulled out more than $34 billion from Indian equities.

Domestic Investors Provide Partial Cushion​

Domestic institutional investors have stepped in to absorb some of the foreign selling, investing over $13 billion into equities so far this month. However, this support has not been sufficient to reverse market direction amid continued foreign outflows.

Volatility Remains Elevated, Recovery Uncertain​

Market volatility continues to remain high, reflecting persistent uncertainty. The NSE Volatility Index is currently at a four-year high, signaling investor caution.

In contrast, volatility indicators in other energy-dependent markets such as Japan and South Korea have moderated after earlier spikes during the conflict.

With limited clarity on geopolitical developments, investors remain cautious about the near-term outlook. Prolonged tensions could further delay a recovery in foreign investment flows and weigh on broader market stability.