Foreign Investors Flee Indian Assets At Record Pace On Oil Shock, Pummel Rupee
Foreign investors have pulled a record $12.14 billion from Indian equities and a six-year high of ₹152 billion from bonds since the Iran war began on February 28. The exodus is fueled by fears that soaring oil prices will trigger a spike in inflation and derail India’s growth trajectory.
Foreign investors are pulling out of Indian bonds and equities at a record pace, as the Iran war-driven surge in oil prices fanned worries over a pick-up in inflation and clouded India's growth outlook, sending the rupee reeling.
Foreign investors have sold a net $12.14 billion worth of Indian shares since the war began on February 28, marking the biggest monthly outflow on record.
Net bond sales by foreign portfolio investors under the Fully Accessible Route (FAR) reached 152 billion rupees ($1.61 billion), the highest since this category was introduced six years ago.
These outflows, coupled with risk-off sentiment, have sent the rupee tumbling to successive all-time lows. On Friday, the local currency fell 0.9% to 94.7875 and has declined about 4.2% since the war began, compounding losses for foreign investors and likely hastening their exit from Indian assets.
The war on Iran, now nearing a month, has driven a surge in oil prices, heightening macro risks for India. The country imports nearly 85–90% of its crude oil needs, leaving it particularly vulnerable to higher oil prices.
The worries are reflected in heightened volatility expectations for the rupee and Indian equities.
Economists have marked up inflation forecasts, downgrading growth estimates and incorporating a steeper rupee depreciation trajectory into their baseline.
"The escalation in the Middle East has pushed energy risks back to the center of India's macro-outlook, with oil prices, the rupee and the current account now tightly intertwined in investor thinking," said Krishna Bhimavarapu, APAC Economist at State Street Investment Management.
Hedging costs against rupee depreciation have also jumped since the war. This, alongside heightened volatility expectations, has eroded the appeal of Indian bonds and equities for foreign investors.
($1 = 94.6110 Indian rupees)
(Reporting by Dharamraj Dhutia and Bharat Rajeswaran; additional reporting by Jaspreet Kalra; Editing by Janane Venkatraman)
Published By : Shourya Jha
Published On: 27 March 2026 at 15:28 IST