Foreign portfolio investors (FPIs) pulled out a massive Rs 41,000 crore from the Indian equity market in March on anticipation of rate hikes by the US Federal Reserve and declining geopolitical environment amid the Russia-Ukraine war.

According to data available, FPIs were net sellers to the tune of Rs 41,123 crore in the equity market last month, way higher than net withdrawals of Rs 35,592 crore in February and Rs 33,303 crore in January.

It is expected that flows from FPIs are expected to remain fraught in the near term in terms of elevated crude prices and inflation. Foreign investors have been withdrawing money from equities since the last six months, pulling out a net Rs 1.48 lakh crore between October 2021 and March 2022.

Apart from equities, the debt market saw net outflows to the tune of Rs 5,632 crore in March. Apart from India, other emerging markets such as Taiwan, South Korea and the Philippines too witnessed FPI outflows in March.

Amid the war between Russia and Ukraine still continuing, foreign flows into Indian equities could shift either way depending on how the underlying scenario changes under the given fast-changing global landscape.

Commenting on the latest outflow, Atanuu Agarrwal, Co-Founder, UpsideAI, said, “The primary reason remains the changing interest rate environment and the Fed's signal to end the stimulus. There are multiple other reasons -- India is expensive, crude has shot up, INR is weak, Russia-Ukraine conflict leads to flight to safety. But all things being equal, if the Fed had signalled a delay in raising rates, we may not have seen a sale of this scale.”