Amid ongoing US-Iran war and other geopolitical tensions, foreign investors have remained net sellers of Indian equities worth ₹1,07,575 crore, while domestic institutional investors have emerged as net buyers with purchases totaling ₹1,68,965 crore, so far this year.
On Friday, foreign institutional investors (FIIs) were net sellers of Indian equities worth ₹10,716 crore on March 13, 2026, according to provisional exchange data. This marked the largest single-day outflow since October 28, 2025. In contrast, Domestic Institutional Investors (DIIs) were net buyers, purchasing shares worth ₹9,977 crore.
During the session, foreign investors bought equities worth ₹11,923 crore but sold shares amounting to ₹22,640 crore. Meanwhile, domestic institutional investors purchased shares totaling ₹22,708 crore and offloaded equities worth ₹12,730 crore.
“The weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee and concerns surrounding the impact of high crude price on India’s growth and corporate earnings contributed to the concern of FPIs. The poor returns from India vis a vis other markets – both developed and emerging- during the last eighteen months is the principal reason for FPI’s indifference towards India. If their sustained selling strategy is to change, there should be clear indications of earnings recovery in India. In the present uncertain context, this will take time.
Now FPIs regard South Korea, Taiwan and China as better markets to invest since they are relatively cheaper than India even after the recent correction. Also, the corporate earnings prospects in these markets appear better than that of India. Therefore, further selling by FPIs in India is likely in the short term,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Why FIIs have remained net sellers of Indian equities?
According to Seema Srivastava, Senior Research Analyst at SMC Global Securities, FIIs have recently been net sellers of Indian equities, due to heightened geopolitical tensions between the United States and Iran.
Srivastava explained that such conflicts typically create a global “risk-off” environment, where investors prefer safer assets like U.S. Treasury bonds, gold, and the U.S. dollar rather than riskier emerging markets. The sharp rise in crude oil prices has added further pressure.
“As one of the world’s largest oil importers, India faces significant macroeconomic risks when oil prices surge higher import costs can worsen inflation, expand the current account deficit, and weaken the rupee. These factors collectively discourage foreign investors from maintaining large exposures to Indian markets,” she said.
On the other hand, Ajit Mishra – SVP, Research, Religare Broking, believes that improved valuations after the market correction, along with the possibility of an interest-rate easing cycle by the U.S. Federal Reserve, could redirect global capital flows toward emerging markets such as India.
Mishra further noted that regulatory reforms by the Securities and Exchange Board of India, including simplified FPI registration, relaxed disclosure norms, and improved settlement mechanisms, have enhanced the ease of access for foreign investors.
“ Coupled with stabilizing corporate earnings—particularly in the banking sector—and strong domestic growth prospects, these developments could gradually encourage renewed FII allocations to sectors such as infrastructure, automobiles, and financials,” he said.
Here are five factors that could bring back FIIs to India –
1] Ease in crude oil prices
Srivastava believes that a key trigger would be stabilization or a decline in crude oil prices to below $85–90 per barrel, which would ease concerns about inflation and fiscal balance.
Brent crude settled above $100 on Friday for a second straight session as the Iran war moved into its third week, with oil tanker movement through the Strait of Hormuz remaining largely stalled.
Brent futures climbed 2.67%, or $2.68, to finish at $103.14 per barrel. Meanwhile, West Texas Intermediate crude oil rose 3.11%, or $2.98, to settle at $98.71 per barrel.
Prices continued to advance despite efforts by the U.S. and its allies to contain energy costs. The International Energy Agency has agreed to release 400 million barrels from strategic reserves — the largest such coordinated move on record.
2] US Fed rate cut
Market experts believe that another important factor is US monetary policy.
Srivastava explained that if the Federal Reserve signals interest rate cuts or adopts a more accommodative stance, US bond yields would likely fall and the dollar could weaken, prompting global funds to reallocate capital toward higher-growth emerging markets such as India.
3] Macro Stability
According to Akshat Garg, Head, Research & Product at Choice Wealth, macro stability matters a lot for FIIs to come back to India.
Garg opined that if India maintains strong economic growth, controlled inflation, and a relatively stable rupee, global investors feel more comfortable allocating large capital. Currency volatility often increases the risk for them, so stability becomes a big trigger.
4] Policy consistency and regulatory clarity
Garg further added that FIIs prefer markets where tax rules, regulations, and capital market policies remain predictable. When the investment environment feels stable and transparent, long-term global capital naturally flows back.
5] Earnings growth and valuations
Strong corporate earnings growth, particularly in banking, infrastructure, capital goods, and manufacturing, could further draw foreign capital, Srivastava opined.
She further said that valuations also play a role. Indian equities have been trading at a premium compared to other emerging markets, leading to profit-taking. However, a market correction could improve valuation attractiveness and provide better entry points.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
