Foreigners dumped $12 billion in Indian stocks this month. The risk-off shift accelerates as energy costs surge.

The Big Picture India faces its largest foreign equity outflow in a single month. The March 2026 figure surpasses any previous withdrawal, even during past crises. The combination of geopolitical tensions and elevated energy prices is overwhelming the country's long-term growth narrative.

Emerging markets are always the first to suffer when risk appetite evaporates. This time, war and its commodity consequences are accelerating the flight. India, considered a relatively stable emerging market destination, no longer offers shelter.

“War-driven risk aversion is temporarily burying India's growth story.”

Why It Matters **$12 billion** in one month isn't a minor correction. It's a fundamental reassessment of where to park money when the world feels more dangerous. Institutional investors are cutting exposure to perceived risky assets, regardless of underlying economic fundamentals.

The impact extends beyond stock exchanges. Sustained capital outflow weakens the rupee, raises financing costs for Indian companies, and slows investment. Sectors reliant on foreign capital, like commercial real estate and infrastructure development, face immediate headwinds.

The key question is whether this represents a tipping point for emerging markets generally. If investors are pulling out of India—traditionally a favorite—other markets with weaker fundamentals could face even greater pressure. Contagion is a real possibility.

The Bottom Line Watch whether this capital exit marks the start of a broader emerging market trend or remains a panic-driven isolated episode. Upcoming flow data to other countries like Brazil, Mexico, and Southeast Asia will be crucial. As long as war continues and energy prices stay elevated, risk aversion will likely persist.