Rising yields on US Treasury securities and a weakening rupee have made risk-free assets more attractive relative to equities, prompting overseas investors to cut exposure.
So far in March, overseas investors have offloaded equities worth nearly $11 billion, marking the largest monthly outflow on record, according to data compiled by Bloomberg.
The previous peak was in October 2024, when net outflows stood at $10.9 billion. That was followed by $8.4 billion each in January 2025 and March 2020, during the US tariff tensions and the pandemic-driven market selloff.
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A reversal in FPI selling appears unlikely in the near term. The surge in bond yields and currency weakness has made equities less attractive, while a prolonged conflict in West Asia could further weigh on corporate earnings.
Analysts are already pencilling in a 2–3% cut in Nifty 50 earnings estimates for FY26. “FPI inflows into India are likely to remain limited, and the rupee is expected to stay weak as the country faces pressure from higher oil prices, remittances, and capital flow dynamics,” said Bhanu Baweja, Chief Global Strategist at UBS.
Yields on US Treasuries have surged by more than 50 basis points since the beginning of March to around 4.4%, while the Indian rupee has depreciated nearly 4% against the dollar during the same period, reducing the attractiveness of Indian assets to overseas investors.
Meanwhile, Brent crude trading above $100 per barrel amid tensions in West Asia has reinforced a broader risk-off mood. Concerns over potential supply disruptions through the Strait of Hormuz have further heightened caution toward energy-importing economies.
The rupee, which hit a record low of 94.78 per dollar on Friday (March 27), has weakened by nearly 4% since the start of the West Asia conflict. A weaker currency erodes returns for foreign investors, often triggering pre-emptive selling.
The Nifty 50 has fallen nearly 17% in dollar terms this month, pulling valuations down to 17.4 times 12-month forward earnings, compared with a five-year average of about 20 times, according to Bloomberg data.
However, the FPI selling is not limited to India. In March, investors sold $23 billion worth of Taiwanese shares, while South Korea witnessed outflows of $17.4 billion.
According to the latest data from National Securities Depository Limited, overseas investors held about $710 billion worth of Indian equities as of March 15, accounting for roughly 15% of the country’s equity market.
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