FPIs close March 2026 with net selling of $(12.58) Billion in equities

FPI AUC FALLS BY $130 BILLION IN MARCH 2026

FPI selling was decisive in March with net equity selling of $(12.58) billion and net selling seen in 21 of the 23 sectors. That was unprecedented. Net selling was dominated by BFSI, which accounted for over 50% of the FPI selling in March, at $(6.49) billion. In March 2026, the FPI equity AUC saw its sharpest fall to $660 billion. FPI equity AUC is now nearly 30% below its September 2024 peak of $922 billion. Even the overall FPI AUC has fallen sharply from over $1 trillion to $735 billion. FPIs sold almost uniformly through March 2026; $5.70 billion in the first fortnight and $6.88 billion in the second fortnight.

Data Source: NSDL

WHAT TRIGGERED HEAVY FPI SELLING IN MARCH 2026?

• Geopolitical risk was the big factor, especially considering that India depends on the Middle East for bulk of crude oil and gas procurement. The war has already forced the government to ration the allocation of gas to non-priority industries.

• As the projections for FY27 trickle in, it is clear that the war would be a double whammy for India. On the one hand, it is likely to spike the consumer inflation closer to 4.8%, while the GDP growth is likely to taper to below 6.0% for FY27.

• The third factor that triggered the sharp FPI selling was the vertical fall in the rupee. Since the war started, the rupee weakened from ₹91/$ to ₹95/$. While the rupee has since been propped up by RBI measures, FPIs do not appear too optimistic.

SECTORS DRIVING FPI ACTION IN MARCH 2026

From the perspective of sectoral themes, downside themes dominate monthly flows.

• At $6.49 billion, FPI selling in BFSI alone accounted for 51.5% of overall FPI selling in March 2026. BFSI is the most vulnerable to any macro shocks to the economy.

• The BFSI selling was substantially compounded by the governance issues raised by the outgoing HDFC Bank chairman; as the bank saw heavy FPI selling in March.

• Automobiles saw net FPI selling of $1.33 billion due to concerns over weak consumer demand, input costs, supply chain constraints, and gas rationing to the industry.

• Construction was another sector that saw close to $1 billion of net selling in March due to a slowdown in government spending. Realty was hit by demand concerns.

• Some of the defensives like healthcare, FMCG, and telecom also saw net selling in March, although that looked more like a part of index selling by passive funds.

• Amidst the selling pressure, the one sector that continued to attract buying interest from FPIs was the capital goods sector, let by L&T. These companies are expecting major order flows as the reconstruction in the Middle East commences. Also, FPIs are betting on Indian capex (government and private) to revive sharply in FY27.

For now, the war and the rupee are having a big negative effect on FPI flows. The big question is whether the war impact would be structural or peripheral?