Venezuela attack may put pressure on FPI flows, impact on equities limited

The US strike on Venezuela may cause short-term jitters in Indian markets, but trade deal uncertainty, FPI flows and geopolitics remain the bigger overhang

The US attack on Venezuela is unlikely to have much impact on Indian equities in the near term, beyond some jitters when the markets open for trade on Monday.

 

However, heightened geopolitical tensions could prompt foreign portfolio investors (FPIs) to sell emerging market assets, including Indian equities, and move towards safer havens.

 

Moreover, it could make a favourable trade deal with the US more difficult and act as a long-term overhang on equities, experts said.

 

The US carried out airstrikes across Venezuela overnight on Friday. Shortly afterwards, US President Donald Trump announced that US forces had captured Venezuelan President Nicolás Maduro and his wife, Cilia Flores, and flown them out of the country. 

“I am not sure whether events in Venezuela will have a first-order impact on Indian equities. Where it puts India in a difficult position is that we still haven’t got that trade deal with the US. We need to stay on the right side of Trump to sign that deal. So, we are caught between a rock and a hard place. And, as the US approaches the midterms in November, Trump will be less inclined to sign the trade deal,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

 

Market experts further said the recent developments may not have much of an immediate impact on oil prices.

 

“Oil prices are up a bit. There are reports suggesting that Venezuelan oil production is much below its capacity. So, it can be increased by fixing the production infrastructure. But all these things take time. People saying oil prices will come down is not right,” said U R Bhat, cofounder of Alphaniti Fintech.

 

“Generally, when there is a lot of uncertainty, markets tend to be jittery, and that can spook investors and lead to a breather. Gold and silver prices may go up. FPIs may sell more and put pressure on Indian markets. I think the market should be range-bound with a negative bias for now,” Bhat added.

 

Indian equities have been turbulent since September 2024 due to declining corporate profits and uncertainty surrounding the India–US trade deal. In August 2025, the US imposed a punitive 50 per cent trade tariff on India.

 

Despite negotiations, India has not been able to reach a breakthrough on the trade deal with the US.

 

The tariff included an additional 25 per cent levy to punish India for purchasing oil from Russia.

 

India imports most of its crude oil requirements, and any rise in oil prices has a negative impact on its import bill.

 

Though Indian equity benchmarks hit fresh highs and ended 2025 with positive returns, the year was marked by turbulence due to tariff tensions.

 

FPIs were net sellers of Indian equities worth ₹1.6 trillion. However, the impact was mitigated by buying support from domestic mutual funds, which were net buyers worth ₹4.9 trillion.

 

“Over the last six months, foreign institutional investors (FIIs) have been net sellers to the tune of nearly ₹1.84 trillion, and this selling has continued despite Indian markets hitting all-time highs, indicating subdued participation. India also underperformed several Asian, European and US markets in 2025, with FIIs clearly preferring other geographies. One key overhang is the delay in the India–US trade deal, which has kept foreign investors cautious. Additionally, the sharp appreciation of the dollar against the rupee — with the rupee nearing 91 in 2025 — has impacted FII returns. This has reduced the attractiveness of Indian assets,” said Sudeep Shah, head of technical and derivatives research at SBI Securities.

 

Going forward, investors will be keenly tracking the December quarter results and the progress of the trade deal.

 

Brent crude closed at $61.42 on Friday, a gain of 1.06 per cent.