Foreign investors have withdrawn $21 billion from Indian stocks since the Iran war began, with $13 billion leaving in March alone - the fastest pace on record. The rupee has fallen to a historic low of over 95 to the dollar, from about 91 before the conflict, as energy costs surge. This massive capital flight reflects growing concerns about India's vulnerability as the world's third-biggest energy importer.

India relies on other nations for 90% of its oil and gas, spending $174 billion on energy imports last year with half from Gulf countries now disrupted by the war. The trade deficit ballooned to almost $120 billion in the year to March 31. Meanwhile, 10-year government borrowing costs have reached an all-time high above 7.1%, adding pressure on the economy.

Foreign ownership of Indian stocks has fallen to a 14-year low of 16%, with the dollar-based MSCI India index lagging Asia benchmarks by over 25 percentage points. While the central bank predicts sustainable growth at 6.9%, the currency crisis persists despite $40 billion in interventions. India's limited presence in the AI boom has further deterred foreign investors seeking returns elsewhere.