FPIs Pull Out $751 Million From Indian Equities

Foreign investor flows into Indian equities turned positive in February after months of selling. But the start of March has already disrupted that momentum.

On 2 March, foreign portfolio investors (FPIs) withdrew $751.4 million, or ₹6,832 crore, from India’s secondary equity market. The move represents the biggest single-day outflow seen in roughly four months and comes soon after strong inflows in February.

The development raises an important question for markets. Was February’s foreign buying a turning point or only a temporary pause in a cautious trend?

Why Did FPIs Resume Selling In March?

Market players are connecting the recent capital flight to escalating geopolitical worries, especially the instability in the Middle East.

As global risks mount, foreign investors usually scale back their investments in emerging markets, shifting their money into more secure assets. The current tensions have reignited fears about energy supplies and the stability of the global economy.

This is significant for India, given its heavy reliance on imported energy. A surge in global oil prices can impact inflation, the stability of the currency, and the overall economic picture.

Data shows that the 2 March sell-off is the largest daily withdrawal since November last year. On 3 November last year, FPIs had sold equities worth $857.2 million, while on 1 September, the outflow had crossed $1 billion.

The timing is notable because foreign investors had only recently turned positive on Indian equities.

How Strong Were FPI Inflows In February?

February had marked a sharp change in trend. FPIs invested about $2.2 billion, or ₹19,782 crore, into India’s secondary equity market during the month. It was the strongest monthly inflow in nearly 17 months.

When investments across both primary and secondary markets are considered, total net FPI inflows during February stood at about $2.5 billion, or ₹22,615 crore.

The buying came after three straight months of net selling until January 2026. Expectations that global trade tensions might ease had encouraged foreign investors to re-enter the market.

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What Does The Broader FPI Trend Show?

Even with February’s inflows, the overall pattern for the current financial year shows a more cautious stance from foreign investors.

In the eleven months leading up to February, FPIs sold close to $7 billion worth of Indian equities across both primary and secondary markets. However, the scale of selling has been lower than the previous year, when withdrawals during the same period had reached $14.2 billion.

Participation in the primary market has also slowed. Investments through initial public offerings (IPOs) and qualified institutional placements fell to around $7.6 billion, roughly half of last year’s level.

Foreign investors appear willing to invest in India but remain selective, especially as valuations are higher than in several other emerging markets.

With geopolitical risks rising again, the key question now is whether the March outflow is only a short-term reaction or the beginning of another cautious phase in foreign investment flows.

Sources

Economic Times

The Hindu