After withdrawing more than ₹1 lakh crore in March, overseas investors have extended their selling spree into early April, as tensions in West Asia continue to simmer, keeping risk aversion intact. Higher yields have improved the relative attractiveness of dollar-denominated assets, prompting capital to move away from emerging markets such as India.
In the first two trading sessions of April, FPIs have sold a cumulative ₹19,837 crore worth of Indian stocks, extending their selling streak to the 23rd straight session, taking the combined outflows to ₹1.37 lakh crore, according to NSDL data.
In March alone, they ₹1.17 lakh crore”>withdrew ₹1.17 lakh crore, marking the highest monthly FPI selling on record, implying an average daily outflow of around ₹6,198 crore. The previous largest outflows were recorded in October, when they sold ₹94,017 crore amid rich valuations.
The Indian stock market began 2026 amid a fresh wave of optimism after underperforming most of its Asian peers in 2025. But unexpected tensions in West Asia have created energy disruptions, clouding the near-term outlook, with analysts not ruling out a resumption of earnings cuts if the situation does not improve.
Although FPIs began 2026 by offloading ₹36,000 crore in January, they turned net buyers in the following month, pumping in ₹22,615 crore, as corporate earnings showed signs of recovery, easing valuation concerns. Sentiment was also supported by an interim trade deal with the US.
Nevertheless, the optimism quickly turned cautious following the fallout of the US-Iran war. In addition to global uncertainty, the steady drop in the Indian rupee and a massive jump in crude oil prices have complicated India’s external accounts, growth prospects, and inflation expectations.
Meanwhile, domestic institutional investors have supported the markets, partially offsetting the impact of FII outflows through consistent buying. However, their support has not been sufficient to fully counterbalance the scale of foreign selling.
Sustained outflows drag Nifty 50 to multi-month lows
The massive exodus has caused the Nifty 50 to remain under pressure for the last six straight weeks, falling 11.2%, and it is now 14% off its January peak. Throughout March, the index suffered heavy losses, causing it to plunge 11.3%, marking the biggest monthly drop since March 2020 and extending its losing streak to a fourth straight month.
The crash also pushed India’s share of global market capitalization to 3%, the lowest in three years, as per domestic brokerage firm Motilal Oswal.
The decline is not limited to India but has been felt across global markets, with Korea (-19%), Indonesia (-14%), Taiwan (-10%), Germany (-10%), the UK (-7%), China (-7%), the US (-5%), and Brazil (-1%) all ending lower in March.
Evolving macro factors to determine FPI flows, say analysts
Prateek Agrawal, MD & CEO, Motilal Oswal AMC, said FPIs, which were strong buyers in February as past issues such as trade deals got resolved, turned sellers in March due to the Middle East crisis, higher oil prices, and a weak INR, and could return depending on evolving conditions.
He added that as the Indian market comes back into focus on the anti-AI trade, sustained earnings growth, a slew of trade deals, and ultimately a stable currency, and high-growth spaces may drive outcomes.
Rajat Rajgarhia, MD & CEO – Institutional Equities, Motilal Oswal Financial Services, said that while near-term FII flows may remain subdued, medium- to long-term allocations are expected to improve alongside India’s growth trajectory.
He further noted that investors should focus on high-growth sectors and market leaders, with selective opportunities emerging across mid-caps, financials, autos, and new-age themes, while maintaining caution on low-growth segments.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
