Foreign Investors Pull Out Rs 21,000 Crore in Four Trading Sessions Amid West Asia Conflict

Foreign Portfolio Investors (FPIs) Pull Out Rs 21,000 Crore from Indian Equities

Key Statistics:

• FPIs withdrew Rs 21,000 crore (approximately USD 2.3 billion) from Indian equities over the last four trading sessions (March 2-6)
• Prior to the outflows, FPIs infused Rs 22,615 crore into Indian equities in February, the highest monthly inflow in 17 months
• FPIs were net sellers for three consecutive months prior to February, withdrawing Rs 35,962 crore in January, Rs 22,611 crore in December, and Rs 3,765 crore in November

Market Analysis:

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The recent sell-off in Indian equities can be attributed to the deteriorating global risk sentiment triggered by the West Asia crisis. Rising geopolitical tensions in the region, particularly following the US and Israel's attack on Iran on February 28, led to a global risk-off sentiment. Market experts attribute the pullout primarily to the potential disruptions in the Strait of Hormuz, which pushed Brent crude prices above USD 90 per barrel.

Other factors contributing to the outflows include:

• Rupee depreciation beyond the 92-per-dollar level
• Elevated US Treasury yields drawing capital back to safe-haven assets
• Mixed early outlook for Q4 FY26 corporate earnings, particularly margin pressures in the IT and consumption sectors

Expert Insights:

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• Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, notes that the uncertainty surrounding the Middle East conflict, recent market correction, and Indian economy's vulnerability to a sharp rise in crude prices have contributed to sustained FPI selling.
• VK Vijayakumar, Chief Investment Strategist at Geojit Investments, expects FPIs to remain sellers until there is greater clarity on the geopolitical situation and crude prices moderate.
• Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, notes that higher crude prices increase risks related to inflation, the current account deficit, and currency stability, weighing on foreign investor sentiment toward emerging markets.

Market Support:

Despite the FPI selling, the market has continued to find support from domestic institutional investors (DIIs) and steady inflows through mutual fund systematic investment plans (SIPs).