FPIs Dump Record Rs 1.14 Lakh Crore Of Indian Equities In March Amid US-Iran War

Foreign Portfolio Investor (FPI) outflows from Indian equities have touched a record Rs 1,13,810 crore in this month as on March 27, according to data from National Securities Depository (NSDL). This is the highest monthly FPI selling on record, surpassing the previous peak of Rs 94,017 crore outflow seen in October 2024.

FPIs also reduced their mutual fund exposure by Rs 1,381 crore. This included Rs 125 crore in equities, Rs 335 crore in debt, and Rs 147 crore in hybrid instruments, and the remaining from 'Other', as per NSDL data.

The March sell-off is a complete reversal from February, where FPIs bought equities worth Rs 22,615 crore. In January, FPIs had sold Rs 35,962 worth of equities. So far, in 2026, the total FPI selling stands at Rs 1.27 lakh crore.

The sell-off comes as US and Israel's war against Iran sent oil prices significantly higher, dampening investor sentiments across the world. The ongoing conflict has disrupted the movement of oil tankers from the Strait of Hormuz, a critical sea route for shipping crude oil across the globe through which one-fifth of the world’s oil passes.

Amid the sell-off, equity benchmarks - Sensex and Nifty 50 - have declined about 9.50 per cent and 9.37 per cent, respectively, since the beginning of the Iran war. The broader market indices Nifty Midcap 100 and Nifty Smallcap 100 have declined about 8.50 per cent, and 7.73 per cent, respectively.

Higher Oil Prices

Since the US and Israel launched strikes on Iran on February 28 after talks about Tehran's nuclear program failed to yield a deal, crude oil prices have surged over 48 per cent.

As on March 27, Brent crude oil futures stood at $105.32 per barrel and US oil benchmark West Texas Intermediate (WTI) crude oil futures quoted at $99.64 a barrel. Before the Iran war, on February 27, Brent crude quoted at $72.48, while the WTI crude stood at $67.02.

When crude oil prices rise, it leads to an increase in transportation costs, and ultimately leads to higher inflation in every segment. To deal with this inflation, central banks across the world, including the Reserve Bank of India (RBI), typically  increase the interest rates and this puts a negative impact on the global economic growth, raising concerns over global recession. Higher oil prices also mean India has to spend more on imports. This widens the current account deficit (CAD) and puts pressure on the rupee.

Weakness In Rupee

The Indian rupee (INR) also weakened to a record 94.78 level against the US dollar (USD). The USD/INR pair has surged over 4 per cent since the Iran war began, further pushing FPIs away from Indian equities.

A weaker rupee tends to make Indian assets less attractive for FPIs, as it erodes returns when converted into dollars. Even if equities deliver gains in local terms, currency depreciation can significantly reduce overall returns.