Nifty Flat In Dollar Terms Since September 2021 Amid Rupee Weakness, FPI Outflows

Since September 2021, the value of the Nifty index has not gone up much when compared to the U.S. dollar. This is because the Indian rupee has lost a lot of value, and foreign portfolio investors (FPIs) have left the market.

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Indian Rupee Decline Affects Returns

The Indian rupee is still under a lot of pressure. The currency fell by 11% year-on-year in the fiscal year 2025–26. This was the biggest drop since FY2011–12.

The weakening currency has reduced gains when converted into U.S. dollars, bringing the Nifty index back to levels seen about 4.5 years ago.

FPI Outflows Accelerate

Foreign investors have significantly reduced their exposure to Indian equities in recent months. FPI's have seen selling of stocks worth ₹1.2 lakh crore in the month of March, which is one of the largest figures ever recorded for a single month. The reason behind outflows has been the global risk aversion and preference for safe havens.

Capital Flows and Market Condition

As the DSP report indicates, the capital account balance of India has begun to show deficits due to many factors, such as poor FDI flows, persistent outflows from FPI, and high foreign investments made by Indians.

It also noted high equity valuation and macroeconomic environment as some of the influencing factors for capital movement.

Geopolitical and External Factors

India’s heavy reliance on energy imports is another factor that has affected the investors’ outlook. Increased crude oil prices in the international market owing to geopolitical tensions in West Asia have created inflation fears. These factors have added to the challenges the equity market faces in maintaining returns in dollar terms.

Market Positioning

The Nifty index has witnessed constant selling pressure in the past few months. As per the DSP study, the Nifty index has entered an oversold condition on the basis of the Relative Strength Index (RSI) for the first time since the 2020 pandemic-induced stock market crash.

The effect of currency devaluation, capital flight from the country, and international uncertainties has contributed to the lack of appreciation in dollars of the Nifty index since September 2021, despite constant domestic market activity.