When I looked at the latest numbers about FPI Portfolio in India, one number jumped out to me: a massive ₹10 lakh crore decline in the portfolio of Foreign Portfolio Investors or FPIs in March. At first, it sounded alarming. But in the search I found, it wasn’t only panic selling; it was a mixture of global tension, market correction and investor behaviour responding to uncertainty.
Let me break down what I understood. This article explains how the portfolio value of Foreign Portfolio Investors (FPIs) in India fell by nearly ₹10 lakh crore in March, following heavy selling and a sharp drop in stock prices over a volatile month. It shows that global tensions between Iran and the US have increased uncertainty, encouraging investors to cut risks, with a great effect on Indian markets. It also reflects on how those moves affected even long-term investors, and what this means for retail investors now coping with that type of market volatility in their portfolios.
FPI Portfolio in India Drops Sharply in March
According to depository data, the total Assets Under Custody (AUC) of FPIs fell sharply:
- February 2025: ₹72 lakh crore
- March 2025: ₹62.46 lakh crore
- Decline: ~13%
- Lowest level in 24 months
Indian markets, on the other hand, suffered a severe correction, with benchmark indices down over 11%. What surprised me was the extent of the impact, especially on midcap and smallcap stocks, with some shares correcting more than 20%.
Why did the FPI portfolio fall in March?
At first, I assumed large sums of money must have been withdrawn by FPIs. But that’s only half the story. As far as I know, there are two possible reasons for this decline:
1. FPI Selling Pressure
In March, the FPIs sold equities worth around ₹1.17 lakh crore. That’s a sizeable outflow and certainly played its part in the decline.
2. Falling Stock Prices
Even if investors don’t sell, a fall in stock prices reduces the total value of their portfolios. Which is why a big portion of this ₹10 lakh crore drop is simply because:
- Stock prices went down
- Portfolio valuations dropped automatically
This is an important insight for me, not every drop means money is leaving the market.
How Global Tensions Triggered the Sell-Off
The larger trigger for all this volatility was the geopolitical tension between Iran and the United States. The conflict created uncertainty across global markets. One concern that kept coming up was about the possibility of disruption of shipping in the Strait of Hormuz. Because a substantial percentage of the world’s oil supply travels through this route, any disruption could:
- Spike oil prices
- Increase inflation
- Hurt emerging markets like India
Consequently, investors across the world chose to cut risk, and India was no exception.
Why Markets Suddenly Rebounded
Relatedly, markets reacted immediately following the announcement of a ceasefire between Iran and the US.
- Indian markets jumped ~3.9%
- Sentiment improved quickly
But the relief wasn’t long-lasting. The following day, caution returned to markets as indices traded in the red. That made me think how sensitive the markets are at the moment; one headline and it turns direction.
Which Countries Were Hit the Most?
As I dug deeper into the data, I saw that the impact wasn’t uniform across countries.
United States (Largest Impact in Absolute Terms):
- AUC fell from ₹31.5 lakh crore to ₹27.5 lakh crore
- Decline: ₹4 lakh crore
Because the US alone contributes to over one-third of total FPI investments in India, this drop was anticipated.
Singapore & Luxembourg (Highest % Fall):
- Singapore: ~15% drop
- Luxembourg: ~15% drop
Both are significant investment centres for worldwide funds, and so weakness in these two mirrors more global risk-off sentiments.
Also Read: Indian Bond Yields Drop 10 Bps on Strong Global Relief
Even Long-Term Investors Weren’t Spared
Something that amazed me was that the long-term institutional investors also saw a decline.
Sovereign Wealth Funds:
- Fell from ₹4.9 lakh crore to ₹4.3 lakh crore
- Around 10% drop
Foreign Central Banks:
- Fell from ₹1.58 lakh crore to ₹1.34 lakh crore
- Over 15% drop
This makes clear that this wasn’t panic; it was a market-wide valuation reset.
What This Means for Retail Investors Like Me
I’m not an expert, but here’s how I personally see this all going:
- Markets Are Still Driven by Global Factors: Even if India’s fundamentals are strong, global events can drive short-term movements.
- Corrections Are Normal: A double-digit correction feels scary, but it’s not unusual, especially after strong rallies in mid and small caps.
- Volatility May Continue: Until geopolitical tensions completely settle, markets may remain volatile.
What I’m Watching Going Forward
Right now I’m watching a few things closely:
- Developments in the Middle East
- Oil price movements
- Continued FPI inflows or outflows
- Stability in Indian indices
If tensions flare up again, volatility could come back quickly.
Also Read: World Bank Sees India GDP Growth Forecast at 6.6% Amid Risks
Frequently Asked Questions (FAQs)
1. Why did the FPI portfolio value fall by ₹10 lakh crore?
This drop can be attributed to significant net selling by FPIs, along with a general decline in stock prices, leading to portfolio valuation collapsing.
2. Did FPIs withdraw ₹10 lakh crore from India?
No, real selling was put at around ₹1.17 lakh crore. The rest of the decline came from dropping stock prices.
3. How did the Iran-US conflict impact Indian markets?
The conflict added to global uncertainty and prompted investors to cut exposure to riskier assets, such as emerging markets like India.
4. Which segment was hit the hardest?
Midcap and smallcap stocks corrected sharply, including some falling up to 20%.
5. Is this a long-term concern for Indian markets?
Not necessarily. It seems to be a temporary response to events across the globe, not an underlying problem.
Disclaimer
This article is for informational purposes only and represents personal observations and understanding of market events. Do not construe this as financial or investment advice. Markets are volatile, and investors may lose money. Readers should do their own research or consult with a qualified financial advisor before making any investment decisions.
