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Foreign investors exited $11.7 billion (₹1.1 trillion) worth of Indian shares in March alone, nearly the largest monthly outflow on record. Here’s why, and what happens next.
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Macro
While a weaker rupee does hurt import strength, India could become more competitive with exports. In a low tariff regime, a weaker rupee makes goods comparatively cheaper. The rupee is 5 percent weaker this year but foreign reserves remain high with a 11.2 month import cover, giving the RBI space to intervene if needed.
Equities
IndiGo's parent company named former British Airways CEO Willie Walsh as new CEO. Previous CEO Peter Elbers resigned after the mass cancellation debacle in December which led to antitrust action against IndiGo as well. One of Walsh’s main goals is to continue expanding IndiGo’s long haul platform. Shares are down 20 percent this year which will be another challenge.
Blackstone is planning a $500 million (₹47 billion) IPO for AGS Health, a services provider for large US healthcare organizations.Blackstone first acquired AGS in 2025 and the company has grown tremendously with 150 different global clients.
Alts
Novo-Nordisk cut prices of its weight loss and diabetes drugs by 48 and 36 percent respectively. Both drugs will cost $60 (₹5,660) per month going forward. Novo claims this is to make its products more accessible, realistically, it is to combat generics manufacturers which are undercutting its prices.
Cape Town wants to emulate India's GCCs which are used for outsourcing corporate functions. India currently owns 25 percent of the $413 billion (₹38.8 trillion) market with 1,700 different GCCs. South Africa is hoping for geographical diversification and a Europe aligned time zone to pull more companies.
Policy
The government is preparing for a searing hot summer due to less energy supplies. The government is in talks with coal miners and the railways to ensure that adequate fuel is kept at energy stations. Currently, power stations have coal surplus good enough for 23 days.
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The Foreign Investor Retreat, Explained
Foreign investors sold $11.7 billion (₹1.1 trillion) of Indian shares in March alone which is nearly the largest monthly outflow on record. The scale of retreat reflects not just current risk aversion, but a repricing of India’s valuation premium (usually necessitated by high economic growth) in global risk-on environments.
India is particularly exposed because it is a major oil importer. Rising crude prices widen the current account deficit, pressure the rupee, and squeeze corporate margins. A weaker rupee reduces dollar returns for foreign investors, while higher input costs threaten earnings. The result is a feedback loop where global funds reduce exposure even before fundamentals visibly deteriorate.
Indian equities also entered the shock trading at a premium to most emerging markets, justified by strong growth expectations and domestic inflows. Once energy prices surged, that premium became harder to defend. Strategists at GS, Morgan Stanley, and UBS have all become more bearish on the country since higher costs could dampen growth and delay earnings upgrades. Another risk for Indian equities is that investors permanently reprice the valuation premium that stocks normally command. If investors deem that risky situations lead to too much volatility, companies could face a permanent repricing downwards.
With that being said, funds have pulled $52 billion (₹4.9 trillion) from emerging Asian equities since the conflict escalated, reflecting a broad flight from risk. The only reason why India’s outflows stand out is because the last 2 years have seen a cumulative $34 billion (₹3.2 trillion) of foreign outflows; this leads all Asian markets.
Domestic institutions have tried to stabilize markets, absorbing much of the selling. Local mutual funds and insurers have added $13 billion (₹1.2 trillion) in the last month, cushioning declines but not reversing them. India’s equity market is increasingly supported by domestic savings rather than foreign capital. While that reduces volatility over the long term, it also means foreign flows no longer provide the same upside.
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Written by Yash Tibrewal. Edited by Shreyas Sinha.
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