Foreign investors flee Indian markets with record exodus. FIIs withdrew over 1.6 lakh crore from Indian equities in FY26, marking the highest outflow in a financial year amid geopolitical tensions, rupee depreciation, and expensive valuations. However, domestic institutional investors provided crucial support with record 8.5 lakh crore in fresh commitments. Nifty and Sensex declined 5.1% and 7.1% respectively, with March experiencing the worst monthly fall since the pandemic onset. Mutual funds, pension funds, and insurers drove domestic flows while retail investors maintained steady SIP contributions despite 18 months of losses. The weak rupee, Iran conflict, and AI-related technology sector concerns deterred overseas buyers. Recovery in FPI flows remains uncertain pending rupee stability and geopolitical resolution.
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