Summary of this article
Heavy FPI selling has often been followed by strong Nifty 50 recoveries
The Nifty rose over 12 months after every major sell-off examined
FPI flows alone cannot predict the market’s trajectory
Foreign portfolio investors (FPIs) have often rushed to exit Indian equities during major global shocks. But history shows that heavy FPI selling has not necessarily been a reliable indicator of where the Nifty 50 will be a year later.
The past two decades offer several examples. The 2008 global financial crisis, the China-led market turmoil of 2015, the Covid-19 crash of 2020, the Russia-Ukraine war and aggressive US Federal Reserve rate hikes in 2022, and the October 2024 sell-off saw heavy FPI selling.
In each of these episodes, the Nifty 50 was higher 12 months after the corresponding market low.
The current sell-off in March, triggered by the ongoing US-Iran conflict, is still playing out. It is, therefore, too early to draw the same 12-month conclusion.
2008: The Global Financial Crisis
The 2008 global financial crisis was the most severe financial shock in decades. The collapse of Lehman Brothers in September 2008 deepened fears about the global banking system, froze credit markets, and sent investors rushing towards safer assets.
Emerging markets were hit hard as foreign investors cut their exposure to equities and raised cash.
According to National Securities Depository (NSDL), FPIs sold Rs 15,346 crore in October 2008, their highest monthly outflow during the crisis. The Nifty 50 fell to 2,252.75 on October 27, 2008. Twelve months later, on October 27, 2009, it had climbed to 4,846.70. That was a 115.15 per cent gain from the panic low, the strongest 12-month recovery among the episodes examined here.
2015: China Slowdown
In 2015, concerns over China’s economic slowdown triggered another sharp bout of selling across emerging markets. A steep fall in Chinese equities, fears around the yuan and worries about global growth weighed on investor sentiment.
Indian equities were caught in the sell-off. FPIs sold Rs 16,878 crore in August 2015, their highest monthly outflow during that episode. The Nifty 50 touched a low of 7,667.25 on August 25, 2015. By August 25, 2016, the index had risen to 8,592.20, a gain of 12.06 per cent.
The recovery was not as dramatic as in 2008, but investors who bought near the market low were still sitting on double-digit gains a year later.
2020: Covid-19 Pandemic
The Covid-19 crash was unlike anything the markets had seen in years. Lockdowns brought economic activity to a near standstill, and investors rushed out of equities as the scale of the pandemic became clear.
FPIs sold Rs 61,973 crore in March 2020. The Nifty 50 fell to 7,511.10 on March 24, 2020, after the nationwide lockdown was announced. The market saw a sharp V-shaped recovery. By March 24, 2021, the index had climbed to 14,549.40, a gain of 93.71 per cent from the March 2020 low.
Massive monetary and fiscal support, the reopening of economies and the development of Covid vaccines helped revive investor confidence.
2022: Ukraine War And Rate Hikes
In 2022, markets had to contend with two major shocks. Russia’s invasion of Ukraine sent commodity prices sharply higher, and simultaneously, the US Federal Reserve began an aggressive rate-hike cycle to combat rising inflation. Higher US interest rates made dollar assets more attractive and increased the pressure on emerging-market equities. At the same time, expensive crude oil raised concerns about India’s inflation, current account deficit and corporate earnings.
FPIs sold Rs 50,203 crore in June 2022, their highest monthly outflow during the episode. The Nifty 50 fell to 15,183.40 on June 17, 2022. A year later, it was at 18,665.50 on June 17, 2023, representing a 22.93 per cent recovery.
2024-25: High Valuations And China’s Stimulus
Foreign investors turned aggressive sellers again in October 2024. The sell-off came amid concerns over expensive valuations in parts of the Indian market, expectations around China's stimulus measures, geopolitical risks, and changing expectations around global interest rates.
FPIs sold Rs 94,017 crore in October 2024, the largest monthly outflow recorded at that point.
The Nifty 50 fell to 24,073.90 on October 24, 2024. Twelve months later, on October 24, 2025, the index stood at 25,795.15, a relatively modest 7.15 per cent gain. The recovery was much weaker than those seen after the 2008 and 2020 crashes, but the market was still above the corresponding panic low.
2026: US-Iran Conflict
The escalation of the US-Iran war triggered a sharp deterioration in global risk appetite. Concerns over crude oil supplies, higher energy prices, inflation and the economic impact of a prolonged conflict led to a sharp deterioration in global risk appetite. FPIs sold Rs 1,17,775 crore in March 2026, according to data from the NSDL. That is the highest monthly FPI outflow among the episodes examined and the largest monthly selling recorded in the Indian market.
The Nifty 50 fell to 22,283.85 on March 30, 2026. It has since recovered to 23,875.35 as of September 2, 2026, a gain of 7.14 per cent from the March low.
However, the March 2026 episode is still unfolding. A clearer picture will emerge once the Nifty completes the 12-month period in March 2027.
What FPI Selling Can And Cannot Tells Investors
Heavy FPI selling does not automatically mean that Indian equities will remain weak for the following year. In some cases, the biggest selling has happened close to the market bottom. Investors who treated FPI outflows as a signal to stay away from equities could have missed some of the strongest recoveries. That does not mean FPI flows should be ignored.
Foreign investors are large participants in Indian equities. A concentrated bout of selling can affect liquidity, valuations and prices in the short term. But their buying or selling, on its own, does not tell investors where the market is headed.
The numbers in this analysis also need to be read correctly. The 12-month gains are calculated from the Nifty 50’s lowest level in the month when FPI selling peaked. They show the extent of the recovery from the low. They do not represent the return an investor would have earned from the day FPIs started selling. The Indian market has also changed significantly over this period. Domestic mutual funds, institutions and retail investors now play a much bigger role than they did during the 2008 crisis. This has created a larger pool of domestic money that can support the market when foreign investors sell.
