Foreign Institutional Investors (FIIs) sold off shares amounting to ₹12,048 crore over the initial two days of March in the cash market due to increasing tensions in West Asia.
On Wednesday, March 4, FIIs offloaded equities worth ₹8,752.65 crore, while domestic institutional investors (DIIs) purchased stocks worth ₹12,068.17 crore, as per data from the exchange. On Monday, March 2, FIIs offloaded equities worth ₹3,295.64 crore, whereas DIIs bought shares valued at ₹8,593.87 crore.
Further, FIIs have remained net sellers in Indian equities throughout the first quarter of 2026, which has weighed on the Nifty 50 index. In February 2026, FIIs sold off ₹6,640.78 crore, resulting in the index finishing at 25,178.65, a decrease of 0.6%.
The sell-off was even more pronounced in January 2026, marked by outflows of ₹41,435.22 crore, as the benchmark closed at 25,320.65, down 3.1% for the month.
The recent foreign outflows underscore a cautious sentiment among global investors amid uncertainties in the macroeconomic landscape and geopolitical tensions.
Crude oil impact on FIIs
Experts opine that FIIs are likely to hold off on making sustained investments in India until there is more clarity regarding the geopolitical situation. Specifically, crude prices need to decrease if India aims to attract more investment from FIIs.
“FIIs will wait for clarity on the geopolitical front to make sustained investments in India. Crude prices should cool down if India is to become an attractive investment destination for FIIs. DIIs flush with funds will continue to buy, supporting the market,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
Increasing crude oil prices adversely affect Indian stock markets due to elevated import expenses, inflationary pressures, and depreciation of the rupee, considering that India relies on imports for 80-85% of its oil needs.
Experts have highlighted that a sustained rise in oil prices may worsen India’s current account deficit, heighten inflationary pressures, and put a strain on budget balances, potentially jeopardising macroeconomic stability.
A sustained increase in crude oil prices could widen the current account deficit and exert pressure on the currency, potentially leading to further FII outflows, said Ashwini Shami, President and Chief Portfolio Manager, OmniScience Capital. However, he added that this should not be interpreted as a deterioration in underlying economic fundamentals; rather, it reflects the impact of evolving geopolitical conditions.
Crude oil prices today
Oil prices rose more than 3% on Thursday, continuing a rally as the intensifying US-Israeli conflict with Iran heightened concerns about potential extended disruptions to essential oil and gas supplies from the Middle East.
Brent crude increased by $2.44, or 3%, reaching $83.84 per barrel by 0722 GMT, marking the fifth consecutive session of gains. US West Texas Intermediate crude climbed $2.44, or 3.27%, to $77.10.
Crude oil markets remained unsettled as they confronted persistent supply risks following the incidents in the Middle East, with trade flow concerns through the Strait of Hormuz highlighted by ANZ analysts in a note on Thursday.
In the domestic market, MCX Crude Oil futures (Mar 2026 expiry) are up 2.59% so far today at ₹7,117 per barrel.
FIIs classic risk-off response
Further, Sudeep Shah of SBI Securities, explained that the recent selling by FIIs, amounting to over ₹12,000 crore in the first two trading sessions of March, reflects a classic risk-off response to rising geopolitical tensions following the escalation of the US–Iran conflict.
Shah said that historically, during periods of global uncertainty, FIIs tend to reduce exposure to emerging markets like India and seek safety towards safer assets such as the US dollar & Gold.
“Another key risk being closely monitored by global investors is the possibility of disruption in the Strait of Hormuz, a critical global oil supply route. If tensions escalate further and crude prices spike significantly, FIIs may continue to remain cautious in the near term. However, if there is any sign of de-escalation and crude prices stabilise, then FII selling could subside, given India’s relatively strong growth outlook compared with other emerging markets,” added Shah.
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