Stock market: FPI outflows at Rs 45,000 crore in 8 days, worst since Jan 2025; key reasons

Foreign outflows topped the Rs 45,000 crore mark in the first eight sessions of March, marking the worst monthly reading since January 2025, as benchmark indices Sensex and Nifty fell for the third straight day on Friday amid the West Asia crisis.
Concerns over rising crude oil prices, rupee depreciation and a global equity selloff weighed on investor sentiment. The lack of clear on-ground signals on a quick resolution to the Iran war or the resumption of safe passage for ships through the Strait of Hormuz further dampened sentiment. Analysts warned that persistently higher oil prices could leave the Indian economy vulnerable.

"With the heightened uncertainty surrounding the West Asian conflict continuing, globally markets are weak and in unchartered territory. Weakness in the US markets indicate that rebound in the market is some time away. With Brent crude around $100, the bulls are on the defensive. With the FIIs persisting with their sustained selling strategy, even largecap bluechips are under pressure," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Oil at $150?
Investors feared crude oil may touch $150 a barrel level if the Iran war is intensified. Brent oil for May delivery last traded $100.63 a barrel, up 0.17 per cent. It has jumped 48 per cent in the past one month. Nuvama Institutional Equities, which hosted experts from consultancy firm FGE Nexant suggested that Strait of Hormuz's continued closure (20 mbpd) risks crude at $110–150 a barrel in 4–8 weeks.

They said releasing of strategic reserves could be a near-term relief and may lead to future demand restocking. The brokearge noted that Qatar LNG production may restart in two weeks of SoH reopening as facilities remain undamaged. India is highly vulnerable but short-term crude demand is manageable. Imports may drop if LNG prices stayed high, they warned.

Risk-off trade
Equity is considered a risky asset. Sensex and Nifty have now fallen 8-9 per cent in the past one month, as there is a risk off trade globally amid geopolitical tensions. US stocks too have fallen 5-6% during the same period.

Treasury Secretary Scott Bessent today said the US was providing a temporary authorisation to permit countries to purchase Russian oil currently stranded at sea. The temporary increase in oil prices is a short-term and temporary disruption, he said. Global investors, however, are unimpressed with recent steps to ease oil prices.

Rupee takes hit
Rupee last traded at 92.37 against the dollar. A falling rupee may eat into FPI returns. This has been a key concern for FPI and so is a lack of AI plays in India. Foreign outflows stood at Rs 45,329 crore in March, the worst since January 2025's Rs 78,027 crore outflows.

This is against Rs 22,615 crore inflows in February 2026 and Rs 35,962 crore outflows in January 2026.

"The INR experienced high volatility sinking to all-time lows multiple times recently. Cross-border flows remain flippant with large FPI equity outflows in early Mar’26 reversing inflows seen in Feb’26. The only reassurance seems to be a manageable current account deficit and hale forex reserves, which give some wiggle room for monetary policy," SBI Securities said.

Triggers for FPI comeback

One way, as Christopher Wood of Jefferies said, foreign investors are most likely to return to India in size is a sharp correction triggered by a sudden cessation in domestic mutual fund inflows. The other trigger, Jefferies said, for a rotation back into India is a sudden conviction that the semiconductor cycle has peaked which for now remains lacking.

Wood said the more the returns on the AI capex are questioned, and the more there is a question mark over the continuing willingness to finance that capex, the more it will become a real possibility that 2026 will mark the peak year for AI capex with. He noted that four major US hyperscalers have guided investors for an enormous $620 billion in capex this year.