The conflict in the Middle East has created a risk-filled situation in the financial markets. It remains to be seen how the conflict will develop and affect the oil and currency markets, said Dr VK Vijayakumar, chief investment strategist at Geojit Investments, commenting on the crisis. According to him, FIIs are likely to wait and see how things develop before making further commitments in emerging markets.
Echoing a similar sentiment, Nachikita Swarikar, fund manager at Artha Bharat Global Multiplier Fund, said he expects widespread selling of risk assets in both developed and emerging markets against the backdrop of the US-Israeli attack on Iran.
He said trading activity appeared to be increasingly biased towards US securities, with a parallel shift in flows towards bullion, indicating a potential outflow of capital from emerging markets. “We expect the current run of oil, gold and silver in US Treasuries to extend,” the expert added.
Swarikar also sees a deep impact of the war on India, accelerating the outflow of foreign capital as it becomes dependent on imported crude oil. “Higher crude oil prices could widen the current account deficit, suppress domestic inflation, pressure the rupee,” he warned.
Vijayakumar said the buying by FIIs on several days in February indicated a clear shift in their investment strategy towards India. “There were divergences in sectoral investments in February. FPIs sold heavily in IT stocks due to anthropic shock and continued weakness in this sector. But they were buyers in financial services and capital goods,” said a Geojit analyst.
While FPIs invested Rs 19,782 crore in secondary markets, about Rs 2,832 crore was pumped into the primary market. On Friday, FIIs sold shares worth Rs 7,536.36 crore, triggering massive selling. Benchmark indices Nifty and the BSE Sensex, ended sharply lower on Friday amid selling pressure across the board. Auto, financials and FMCG were the big laggards while the IT sector saw the best buying action. In a volatile session, the broader Nifty closed by 317.90 points or 1.25% at 25,178.65, while the 30-share Sensex fell by 961.42 points or 1.17% at 81,287.
FPI trends
February saw an inflow of Rs 35,962 crore after a sharp outflow in January. FIIs are still net sellers at Rs 13,347 crore in 2026.
In 2025, FII buying trends remained subdued, but there was an overall falling trend. They withdrew Rs 1,66,286 crore from the Indian markets as business deal delays and premium pricing sentiments weighed.
FIIs were net sellers in December, raising domestic shares worth Rs 22,611 crore.
The April-June 2025 period witnessed a total outflow of Rs 38,673 crore. At the same time, the January-March quarter saw a massive sell-off of Rs 1,16,574 crore.
