Foreign investors are set to withdraw a record $12 billion from Indian equities this March, driven by the ongoing conflict in the Middle East that is disrupting oil and gas supplies. With just two trading days remaining, foreign portfolio investors have already pulled out 1.12 trillion rupees ($12.1 billion), surpassing the previous record monthly selloff from October 2024. Concerns over India’s economic growth are escalating, as highlighted by HSBC’s flash Purchasing Managers’ Index, which indicates a slowdown in private-sector activity to its weakest level since October 2022.
The implications for the Indian market are significant. Rising energy costs, exacerbated by the conflict, threaten to widen India’s current account and fiscal deficits, with projections suggesting that sustained oil prices between $85-$95 a barrel could lead to further capital outflows of $40 billion to $50 billion. The benchmark Nifty 50 has already declined by about 7.4% this month, and the rupee has weakened sharply against the dollar, reflecting investor anxiety over economic stability.
Market professionals should note that the ongoing geopolitical tensions and their impact on energy prices are likely to keep foreign investors on the sidelines. With the Indian equity market’s performance closely tied to oil price fluctuations, the current environment presents substantial headwinds, making it challenging for the market to attract renewed foreign investment in the near term.
Source: cnbc.com