Foreign Investors Sell Indian Stocks at a Record Pace in March Amid Rising US-Iran Tensions

India's FPI Holdings Plummet Amid West Asia Tensions

Key Highlights:

• Foreign Portfolio Investors (FPIs) have remained net sellers in all trading sessions in March, pulling out ₹1.12 lakh crore through March 25, with an average daily outflow of ₹6,235 crore.
• Total FPI outflows for March could reach approximately ₹1.25 lakh crore, surpassing the previous record of ₹1.14 lakh crore seen in October 2024.
• The heavy selling has sent the Nifty 50 to the lowest level in 11 months, while the Indian rupee has reached a record low of 94 against the US dollar.

Market Impact:

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• FPIs began 2026 by selling ₹36,000 crore in January, but turned net buyers in February as corporate earnings showed signs of recovery.
• However, they turned cautious again following the escalation of the US-Iran conflict.
• In 2025, FPIs withdrew ₹1.66 lakh crore from Indian equities, but the impact on the domestic market remained limited as the selling was largely absorbed by domestic institutional investors.

Elevated Crude Oil Prices Weigh on Investor Sentiment:

• Elevated crude oil prices, with Brent crude hitting a four-year high, have been a key factor behind the heavy selling by FPIs in March.
• Disruption to global oil supplies, particularly in India, which imports around 85% of its crude requirements, has also impacted investor sentiment.
• Qatar has halted liquefied natural gas (LNG) production following a series of attacks by Iran, further impacting India, which imports nearly 50% of its natural gas needs.

Global Brokerage Downgrades:

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• Morgan Stanley has downgraded India from "overweight" to "equal weight" in its latest portfolio reshuffle, citing the country as one of the Asian markets most exposed to potential disruptions in Qatari LNG supply.
• Goldman Sachs has also lowered its growth forecast for the Indian economy, cutting it to 5.9% for 2026 from an earlier estimate of 6.5%, reflecting higher energy prices and expectations of prolonged disruptions to energy trade.

Regional Impact:

• FPI outflows have not been limited to India, with selling across emerging markets, including Asia, where they have sold about $52 billion of stocks since the war in Iran began.
• Asian shares have come under pressure this month, underperforming their US peers, which have remained relatively resilient thanks to the country's status as a net energy exporter.