Indian stock markets witnessed a massive crash today as the Sensex plunged over 1,000 points and the Nifty dropped sharply, wiping out nearly ₹7 lakh crore in investor wealth within just a few hours. The sharp fall was triggered by rising crude oil prices, global bond yield surge, weakening rupee value, and escalating geopolitical tensions in the Middle East. Banking, IT, auto and metal stocks were among the worst hit as panic selling spread across Dalal Street. According to Ajit Mishra, SVP Research at Religare Broking, markets witnessed a volatile session with benchmark indices ending almost unchanged amid weak global cues and persistent macroeconomic concerns.
India-focused offshore funds and ETFs witnessed net outflows of nearly $5 billion during Q1 2026, marking the largest quarterly withdrawal since the pandemic-led selloff in 2020, according to Morningstar. India-focused offshore funds accounted for $3.46 billion in outflows, while offshore ETFs saw outflows of around $1.5 billion. The quarter witnessed cumulative net outflows of nearly $14.2 billion from Foreign Institutional Investors (FIIs) due to heightened global uncertainty, geopolitical tensions, and profit booking amid elevated valuations. Assets under management of India-focused offshore funds and ETFs fell 19.5% quarter-on-quarter to $77 billion at the end of March 2026, with offshore ETFs holding $24.1 billion and offshore funds $52.9 billion.
Foreign Portfolio Investors have intensified their selling spree in 2026, with FPIs selling equities worth over ₹2.19 lakh crore through the secondary market so far this year, according to NSDL data. This represents a significant escalation from the total outflows recorded in 2025 and has created substantial pressure on domestic markets. The BSE Sensex declined 15.5% during the quarter while the Nifty 50 dropped 14.54% amid broad-based correction in equities. Despite the massive outflows, the number of stocks in which FPIs have invested over 1% has increased from around 900 to approximately 1,300. IT emerged as the clear outperformer with Nifty IT surging 2.43% as a depreciating rupee boosted earnings prospects for dollar-revenue exporters, with Tech Mahindra and Infosys among the top gainers.
Brent crude continued to trade above $100 a barrel, with domestic crude futures gaining nearly 2% to move above ₹10,200, adding to India's import bill and stoking inflation concerns. Gold swung sharply during the session, with MCX Gold dipping close to ₹1,57,500 before recovering to around ₹1,59,300 as a weaker rupee and safe-haven demand provided support. The India VIX surged 4.47% to close at 19.63, reflecting heightened nervousness. Geopolitical developments kept investors unsettled throughout the day, with quarterly tensions in West Asia involving the US, Israel and Iran, alongside a stronger dollar, elevated US bond yields and surging crude oil prices. Valuations became disconnected from near-term earnings visibility, leading to a recalibration in market expectations, according to Morningstar's report.
Despite the significant FPI selling pressure and geopolitical tensions, domestic institutional investors continue to absorb selling pressure and now hold a larger share of Indian equities than FPIs. According to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Ltd, FPIs don't move the market boom and bust cycles, with no long-term correlation between FPI investments and market movements. However, sustained FPI selling can impact sentiment, as evidenced by the current market weakness despite DII buying eclipsing FPI selling by a wide margin. Market conditions started improving in April and early May following the announcement of a ceasefire in West Asia, which eased crude oil prices and improved global risk appetite. Among individual products, the Ireland-domiciled Franklin FTSE India UCITS ETF attracted the highest net inflows of around $270 million during the quarter, while iShares MSCI India ETF saw the steepest outflows at $1.46 billion.
