Long-only funds also recorded $384 million of outflows, the largest in eight weeks. In percentage-of-assets terms, this marks the largest outflow from India since June 2022, according to the report. That episode was followed by about 7% decline in the Nifty before markets eventually found a bottom, offering a historical parallel that some investors are watching closely.
Elara also suggests markets may be entering what it calls a “no-buyer phase” — a stage where selling is still manageable but fresh investors stop stepping in to absorb supply. “Investor behaviour is starting to show early signs of risk aversion, although panic selling is still limited,” the report said.
“At this stage, the larger concern is not the scale of selling but the absence of incremental buying that normally absorbs supply. Historically, such conditions tend to precede the final sharp leg of correction, often followed by a capitulation phase that eventually forms a durable market bottom.”
The shift in sentiment is not limited to India. Emerging market fund flows also turned negative for the first time since October 2025, with around $300 million of outflows compared with typical weekly inflows of $3.8 billion in the week up to March 11. At the same time, foreign funds pulled $4.5 billion from US equities, the largest monthly outflow since April 2025, while high-yield bond funds saw $5 billion of outflows, the highest in eleven months.
Indian markets are already reflecting that pressure. The Nifty 50 has fallen more than 5% this week, marking its worst weekly decline in four years, while BSE-listed companies have lost around ₹20 lakh crore in market capitalisation during the sell-off.
Global macro pressures have amplified the move. Brent crude is hovering near $102 per barrel, raising concerns about inflation and the current account for oil-importing economies like India. At the same time, the US dollar index has climbed back above 100, strengthening the dollar and pushing the rupee to fresh record lows.
Rahul Arora, CEO of Ashika Institutional Equities, said the risk-reward equation for global investors has narrowed in the current environment. “If you have a 12% earnings growth next year… post three, four percent rupee depreciation plus inflation in their home country, you’re looking at what, five and a half six percent,” he said. “For one, one and a half percent delta on the US 10-year, is it worth taking a risk on the Indian market right now?”
Still, some market participants believe the current phase may not last indefinitely. Raman Jauhar, Head of Equities at Axis Capital, said foreign flows are likely to remain volatile in the near term but could stabilise if earnings momentum improves. “Till the time markets and investors have a handle, flows will be volatile,” he said. “One of the things that can turn things around is earnings… as EPS upgrades start coming in, that will trigger FII buying.”
