Foreign investors have turned cautious on Indian equities this month, pulling out Rs 88,180 crore so far as rising global tensions, a weakening rupee and high oil prices dent sentiment. The sharp outflow comes just weeks after a strong February, when foreign portfolio investors (FPIs) had pumped in Rs 22,615 crore, the highest in 17 months. With the latest selling, total FPI outflows for 2026 have now crossed Rs 1 lakh crore. So far in March (till March 20), FPIs have been net sellers on every trading day, steadily exiting the market. While the pace of selling is significant, it is still below the record outflow seen in October 2024.

Market participants say a mix of global and domestic factors is behind the shift. Tensions in West Asia have pushed crude oil prices above $100 per barrel, raising concerns about inflation and growth, and prompting a more cautious, risk-off approach among investors. Vaqarjaved Khan, Senior Fundamental Analyst at Angel One, said fears of a prolonged conflict and possible disruption in the Strait of Hormuz have played a key role.

He added that the pressure has been worsened by the rupee hovering near Rs 92 against the US dollar, rising US bond yields and profit booking after February’s rally. There are also concerns around corporate earnings, with expectations of margin pressure in several sectors adding to the unease. Himanshu Srivastava, Principal Manager Research at Morningstar Investment Research India, said higher US Treasury yields are making dollar assets more attractive, drawing funds away from emerging markets like India.

This is also strengthening the dollar and tightening global liquidity, further affecting sentiment. V K Vijayakumar, Chief Investment Strategist at Geojit Investments, highlighted similar concerns, saying the ongoing conflict, weak global markets and a depreciating rupee have all contributed to the sustained selling. Financial stocks have been hit the hardest, with FPIs offloading shares worth Rs 31,831 crore in the fortnight ended March 15. Looking ahead, analysts expect markets to remain volatile in the near term. Continued tensions or high oil prices could keep investors cautious, while any easing of geopolitical risks, support from domestic investors or better-than-expected earnings may help stabilise flows. For now, a clear turnaround in foreign investor sentiment is likely only when global uncertainties begin to ease.