India Sees Largest Monthly Equity Outflow Amid Middle East Tensions

FPI Outflows Hit Record High in March as Global Tensions and Macro Pressures Weigh on Indian Equities​

Foreign Investors Pull Out USD 12.3 Billion Amid Rising Uncertainty​

New Delhi, March 29: Foreign portfolio investors (FPIs) have withdrawn approximately USD 12.3 billion, equivalent to ₹1.14 lakh crore, from Indian equities in March, marking the highest monthly outflow on record.

The sharp sell-off comes against the backdrop of escalating tensions in the Middle East, a weakening rupee, and rising concerns over the impact of elevated crude oil prices on India’s economic growth.

Outflows May Extend Further With One Session Left​

With one trading session still remaining in the month, market participants indicate that the total outflow figure could rise further.

The previous record for the highest monthly outflow stood at ₹94,017 crore, recorded in October 2024.

2026 Sees Persistent FPI Selling Trend​

Data from NSDL shows that total FPI outflows have reached ₹1.27 lakh crore so far in 2026, highlighting sustained foreign investor caution.

During March alone, FPIs have consistently remained net sellers, offloading equities worth ₹1,13,380 crore in the cash market up to March 27.

February Inflows Reversed Sharply​

The March outflows mark a sharp reversal from February, when FPIs had invested ₹22,615 crore in Indian equities, the highest monthly inflow seen in the past 17 months.

Global and Domestic Factors Drive Selling Pressure​

The continued selling activity has been largely attributed to a mix of global macroeconomic challenges and geopolitical risks.

Weakness in global equity markets following the Middle East conflict, along with steady depreciation in the rupee and concerns over potential declines in remittances from the Gulf region, have weighed heavily on investor sentiment.

Additionally, elevated crude oil prices have raised concerns about their potential impact on India’s growth outlook and corporate earnings.

Rising US Yields and Liquidity Tightening Add Pressure​

Apart from geopolitical factors, higher US bond yields and tightening global liquidity conditions have also played a role in shifting investor preference.

These factors have improved the relative appeal of developed market fixed income assets, prompting capital reallocation away from emerging markets like India.

Valuation Concerns and Broader Emerging Market Trend​

Despite recent corrections in Indian equity markets, valuations remain relatively higher compared to several emerging market peers. This has led to selective profit booking by foreign investors.

The selling trend is not limited to India, as FPIs have also been net sellers in other emerging markets such as Taiwan and South Korea, reflecting a broader risk-off sentiment across global equity markets following the Middle East conflict.