Global funds are withdrawing from Indian equities at an unprecedented rate, with $18.84 billion pulled in just over three months, surpassing the previous full-year record of $18.79 billion set in 2025. This trend is driven by fears stemming from the US-Iran war, which threatens to disrupt the outlook for India's economy, one of the fastest-growing in the world. The Indian equity market has suffered significantly, with over $600 billion in value lost since its peak last year. Analysts note that the appeal of Indian stocks is diminishing as global capital shifts towards economies linked to artificial intelligence, particularly in semiconductor demand. Despite larger outflows from South Korea and Taiwan, Indian stocks are struggling due to a lack of clear narratives and ongoing currency volatility. Domestic mutual funds have injected $31 billion this year, providing some cushion against foreign selling, but this support has not been enough to counter the persistent outflows. Analysts believe that if geopolitical tensions ease, foreign flows could potentially return, but the timing remains uncertain.