Kamal Ghorui
Foreign portfolio investors (FPIs) turned heavy sellers in Indian equities during the first week of March, pulling out nearly Rs 21,000 crore (about $2.3 billion) over four trading sessions as global risk appetite weakened amid escalating tensions in the Middle East The withdrawals came between March 2 and March 6 in the cash market. Trading activity during the period was limited to four sessions as March 3 remained closed for the Holi holiday. The fresh round of selling follows a strong February when overseas investors had infused Rs 22,615 crore into Indian stocks, the highest monthly inflow in 17 months. Prior to that rebound, however, FPIs had remained net sellers for three consecutive months. They withdrew Rs 35,962 crore in January, Rs 22,611 crore in December and Rs 3,765 crore in November, according to data from depositories. Analysts said the latest outflows were largely driven by rising geopolitical tensions in Middle East after the United States and Israel launched a major attack on Iran on February 28 which killed Iran’s Supreme Leader Ayatollah Ali Khamenei, triggering conflict in the region. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said fears over possible disruptions in the Strait of Hormuz pushed Brent crude prices above $90 per barrel, triggering a global risk-off sentiment. Khan also highlighted several additional pressures influencing foreign investors. These include the depreciation of the rupee beyond the 92-per-dollar mark, rising US Treasury yields that are drawing capital back to safe-haven assets, and an uncertain early outlook for corporate earnings in the fourth quarter of FY26, particularly due to margin pressures in the IT and consumption sectors. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, “uncertainty surrounding the Middle East conflict, the recent market correction, the Indian economy’s vulnerability to a sharp rise in crude prices, and the depreciation of the rupee have all contributed to sustained FPI selling in the cash market”. Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, said that elevated crude oil prices raise concerns over inflation, the current account deficit and currency stability, factors that typically weaken foreign investor sentiment towards emerging markets. He also noted that global investors have been increasingly shifting funds into safer assets such as the US dollar amid growing uncertainty. The recent rise in US Treasury yields during the week further accelerated capital outflows from emerging markets. Looking ahead, Vijayakumar said overseas investors may remain cautious until the geopolitical situation becomes clearer and crude prices ease. “Brent crude trading above $90 per barrel is negative for the Indian economy and equity markets,” he said. Despite persistent selling by foreign investors, Indian markets have continued to find support from domestic institutional investors (DIIs), along with steady inflows through mutual fund systematic investment plans (SIPs).
