Foreign investors' biggest exit yet! $12 billion withdrawal shakes the market
The Gulf War scare has caused a panic in the Indian stock market. Panicked foreign investors withdrew nearly $12 billion from the market in March alone. This historic selling spree has shattered all records, even during the COVID era.
The heat of the Gulf War has reached the Indian stock market. Foreign institutional investors (FIIs) have displayed such panic on Dalal Street that it has shattered all previous records.
In March alone (as of Friday), more than $12 billion has been withdrawn from the Indian equity market. This is the largest single-month withdrawal in stock market history.
Skyrocketing crude oil prices and the continuously weakening rupee have increased the concerns of ordinary investors, as this is directly impacting their equity portfolios and mutual fund returns.
A tsunami of selling, the Covid era is left behind
This sell-off isn't a correction. This outflow far surpasses the historic drawdown of ₹94,000 crore in October 2024, ₹78,027 crore in January 2025, and even the ₹61,897 crore that occurred during the COVID-19 pandemic in March 2020.
Since February 26, two days before the Gulf War began on February 28, foreign investors have been sellers in every trading session.
This tsunami has had a direct impact on the indices. The Nifty has fallen nearly 11% in the past month. Meanwhile, the Nifty Bank has fallen 16% and the Nifty PSU Bank has seen a massive 19% drop.
Why are foreign investors fleeing the market?
According to market experts, there are several serious economic reasons behind this panic. The war in West Asia has led to a sharp weakening of global stock markets.
Additionally, the continued decline in the rupee, fears of a decline in remittances from the Gulf region, and the negative impact of high crude oil on India's economic growth rate are deterring foreign investors.
Dr. VK Vijayakumar, chief investment strategist at Geojit Investments, points out that this "risk-off" trend is not just prevalent in India, but also in other emerging markets like Taiwan and South Korea.
However, a fundamental problem for India is that the Indian market's returns over the past 18 months have been weaker than other markets. Unless the war ends and crude oil prices fall, this sell-off is unlikely to stop.
Global brokerage house warns, will the market fall further?
Amidst this historic fall, the world's major brokerage firms have downgraded the rating of the Indian market, which has further increased the fear of retail investors.
Goldman Sachs: This American investment bank has lowered its outlook to "marketweight" and raised its Nifty target for the next 12 months from 29,300 to 25,900. It estimates that the energy shock will lead to a significant decline in corporate profits.
Bernstein: The firm has set a year-end target of 26,000 for the Nifty and warned that in the worst-case scenario, the market could even fall to 19,000 levels.
Nomura: The firm cut its target by 15% to 24,900.
Nomura compared the situation to the Russia-Ukraine war of 2022, when investors only returned after oil prices stabilized and the market became cheaper.