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The West Asia conflict has hit foreign portfolio investors’ India equity assets under custody (AUC) harder than the Covid-19 pandemic, reflecting the severity of the current market correction.

FPI equity assets fell by $79 billion to $710 billion in the fortnight ended 15 March, from $789 billion in the previous fortnight ended 28 February, when the US–Israel–Iran war began, data from National Securities Depository Ltd (NSDL) showed.

The fortnightly decline—the steepest in at least six years—exceeds that seen during the pandemic, when FPI assets fell $60 billion to $281 billion in the fortnight ended 31 March 2020, amid global lockdowns.

In absolute terms, too, FPI assets at $710 billion are the lowest since the fortnight ended 30 November 2023, when they stood at $675 billion.

During the fortnight ended 15 March, FPIs sold cash shares worth $5.9 billion, implying a 7.46% fall in assets was due to selling, while the rest was due to the price plunge in their holdings.

FPIs have remained underweight in India for a second straight year, with their ownership in National Stock Exchange-listed companies falling to a 15.5-year low of 16.7% in the December 2025 quarter, from 17.4% a year ago, NSE data showed.

"De-escalation aside, certain data points pertaining to the conflict seem to have become more severe, resulting in FPIs moving out of risky emerging market (EM) assets to the safety of the dollar," said Swarup Mohanty, chief executive of asset management company Mirae Asset Investment Managers (India).

Mohanty said the latest attrition has come on top of the tech and AI impact on India, which had been “playing on the FPIs' mind”.

Jyoti Jaipuria, founder of portfolio management services firm Valentis Advisors, attributed the plunge in FPI equity assets to a reduction in earnings visibility due to the country's "particular susceptibility" to oil price shocks, and to slowing flows to EMs specifically and to equities in general, consequent to the conflict.

Since the start of the war and the near-closure of the Strait of Hormuz, Brent crude futures have surged 56% to $112.19 a barrel as of Friday, dragging the rupee down 3% to 93.71 against the US dollar on concerns over the impact of high crude prices on India’s current account deficit (CAD).

A $10-per-barrel increase in oil prices raises India's CAD as a proportion of its gross domestic product by 0.4%, according to Jaipuria.

The surge in crude and the rupee’s fall dragged the benchmark Nifty down 8.2% to 23,114.5 on Friday. By 1:45 pm on Monday, it was down another 2.3% at 22,572.85, nearing its 52-week low of 21,743.65 on 7 April.

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