This has turned out to be the worst month so far, as foreign investors continue pulling out from their Indian investments amid the Iran-Israel war.
Commenting on the current trends, Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments said the weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee, fears of decline in remittances from the Gulf region and concerns surrounding the impact of high crude price on India’s growth and corporate earnings contributed to the sustained selling by FPIs.
"It is important to understand that FPIs were sellers in other emerging markets, too, like Taiwan and South Korea. There is a risk-off trend in equity markets, globally after the war broke out in West Asia. The poor returns from India vis-a-vis other markets - both developed and emerging- during the last eighteen months is the principal reason for FPI’s indifference towards India. If their sustained selling strategy is to change, there should be an end to the hostilities in West Asia and decline in crude prices," Vijayakumar said.
On Friday, FIIs sold domestic shares at Rs 4,367.30 crore while DIIs were net buyers at Rs 3,566.15 crore.
Indian frontline indices ended their two-session rally amid sharp cuts as a failure in the Iran-US negotiations dented the market mood. Elevated energy prices and a plunging rupee aggravated troubles for domestic investors. Amid high volatility, markets were mainly dragged by financials, auto and consumer stocks. Nifty settled at 22,819.60, falling by 486.85 points or 2.09% while the BSE Sensex closed at 73,583.22, declining 1,690.23 points or 2.25%.
FIIs in 2026
Foreign investors turned net buyers in February, buying shares worth Rs 22,615 crore in the domestic markets so far. In January, they sold Rs 35,962 crore worth of shares.
In 2025, the FIIs buying trends remained patchy, but the overall trend was bearish. They took Rs 1,66,286 crore from Indian markets as trade deal delay and premium valuations weighed on the sentiments.
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Facts Only
Foreign investors (FPIs) sold domestic shares worth Rs 4,367.30 crore on Friday.
Domestic Institutional Investors (DIIs) were net buyers at Rs 3,566.15 crore on the same day.
The Nifty index fell by 486.85 points (2.09%) to close at 22,819.60.
The BSE Sensex declined by 1,690.23 points (2.25%) to close at 73,583.22.
The market decline was driven by financials, auto, and consumer stocks.
The Iran-US negotiation failure contributed to the negative market sentiment.
Elevated energy prices and a depreciating rupee worsened investor concerns.
FPIs were net buyers in February 2026, purchasing shares worth Rs 22,615 crore.
FPIs sold Rs 35,962 crore worth of shares in January 2026.
In 2025, FPIs withdrew Rs 1,66,286 crore from Indian markets.
Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, cited global risk-off trends and poor Indian market returns as reasons for FPI indifference.
The Iran-Israel conflict and high crude prices are key factors influencing FPI behavior.
Executive Summary
Full Take
The narrative presents a clear cause-and-effect relationship between geopolitical tensions and market behavior, with the Iran-Israel conflict serving as the primary driver of FPI outflows. The strongest version of this argument acknowledges the interconnectedness of global markets, where regional conflicts can trigger broader risk aversion. However, the analysis leans heavily on immediate triggers—war, crude prices, and currency depreciation—while underemphasizing structural factors like India’s long-term economic fundamentals or policy responses.
Patterns detected: ARC-0024 Ambiguity (the article conflates short-term market reactions with long-term trends without clear delineation), ARC-0043 Motte-and-Bailey (broad "risk-off" sentiment is used to explain specific FPI behavior without addressing why India is uniquely affected).
Root cause: The paradigm assumes markets are purely reactive to external shocks, ignoring adaptive resilience. The unstated assumption is that FPIs operate on short-term sentiment rather than strategic positioning. This echoes historical patterns where emerging markets are framed as vulnerable to global volatility, reinforcing a narrative of dependency.
Implications: Human agency is diminished in this framing—policymakers and investors appear as passive victims of geopolitical forces. The beneficiaries are unclear, but the costs are borne by retail investors and domestic institutions left to counterbalance FPI outflows. Second-order consequences could include reduced foreign investment in critical sectors or delayed economic reforms.
Bridge questions: How might India’s domestic policies mitigate FPI volatility? Are there alternative explanations for FPI behavior beyond geopolitical risks? What evidence would challenge the assumption that crude prices are the dominant factor?
Counterstrike scan: A coordinated influence campaign would amplify fear around geopolitical risks to trigger panic selling, then attribute market declines to systemic weaknesses. The article’s focus on immediate triggers aligns with this playbook but lacks the exaggerated language or selective framing typical of manipulation. The content appears to reflect genuine market analysis rather than a deliberate disinformation effort.