Foreigners dump record US$12 billion India stocks in March on war

Published Mon, Mar 30, 2026 · 08:52 AM

FOREIGN investors are fleeing Indian equities at a record clip as a global retreat from riskier assets and concerns over surging energy costs overshadow the nation’s long-term growth story.

Overseas investors have offloaded a net US$11.7 billion of local shares through March 25, according to Bloomberg-compiled data. That puts equities on course for their steepest monthly exodus ever, with total outflows this year exceeding US$13 billion and nearing levels seen a year ago.

Soaring energy costs have hurt oil-importing Asian peers, but the scale of outflows from India points to already bearish global sentiment.

Even before the war, investors were grappling with a weak rupee, a still-nascent earnings recovery and rich equity valuations. The oil shock has worsened those pressures. More concerning, investors say, is the lack of a compelling narrative to draw global funds back even if the conflict eases in the near term.

“As of now, it is a grim picture and there is no immediate catalyst suggesting it is changing,” said Siddharth Chatterjee, a portfolio manager with Franklin Templeton Investment Solutions. The India story is losing its luster as weak company earnings and sluggish local demand weigh on the outlook, he added.

Goldman Sachs, Morgan Stanley and UBS Global Wealth Management have all lowered their expectations for Indian equities.

Goldman strategists are the latest to turn more cautious, downgrading the market as “higher-for-longer” energy prices threaten to worsen the country’s growth outlook.

To be clear, the pivot away from India comes as global funds have pulled about US$52 billion from emerging Asian equities, excluding China, since the Iran war began, putting the region on track for its biggest monthly outflow in Bloomberg-compiled data going back to 2009. 

Still, a steady retreat by foreign funds has led to more than US$34 billion of outflows from Indian equities over the past two years through March, a period also marked by underperformance in local shares. MSCI’s gauge of Indian stocks has lagged its regional peers in all but two of the last eight quarters.

Domestic institutional investors have absorbed much of the foreign selling, pumping in more than US$13 billion so far this month. However, that support has yet to spark a recovery in the face of relentless foreign outflows.

Meanwhile, stock-market volatility remains elevated, signaling continued skepticism over an immediate recovery. The India NSE Volatility Index is trading at a four-year high, while similar gauges for other energy-import dependent countries like Japan and South Korea have eased from peaks reached earlier in the Iran conflict.

“It is too early to say foreign flows will recover as there is still little clarity on peace talks,” said Anna Wu, a cross-asset strategist at VanEck Associates Corp. in Sydney. She warned that a prolonged conflict could trigger stagflation, delaying any recovery in foreign inflows. BLOOMBERG