FIIs pour Rs 22,615 crore into Indian equities in February. Can Iran-Israel conflict flip the trend?

In February, Foreign Institutional Investors (FIIs) invested a substantial Rs 22,615 crore in Indian equities, marking a notable rebound from a significant outflow of Rs 35,962 crore in January. However, the recent escalation of the Iran-Israel conflict has raised concerns about the sustainability of this positive trend. Analysts, including Dr. VK Vijayakumar from Geojit Investments, suggest that foreign investors may adopt a cautious approach in light of heightened geopolitical tensions, potentially leading to a broader sell-off of risky assets. Fund Manager Nachiketa Sawrikar highlighted a shift in trading patterns, with increased investment in US securities and bullion, indicating capital may be moving out of emerging markets like India. The ongoing conflict could exacerbate India's current account deficit due to its dependence on imported crude oil, thereby increasing inflationary pressures and affecting the rupee. Despite the inflow in February, recent selling activities, including a significant Rs 7,536 crore divestment on a single day, have put pressure on major indices like Nifty and BSE Sensex, which experienced notable declines. While sectoral investments varied, with some FIIs showing interest in financial services and capital goods, the overall sentiment remains cautious as developments in the Middle East unfold.