India’s benchmark equity indexes have fallen nearly 12% since January despite resilient economic growth, Finance Minister Nirmala Sitharaman said capital outflows could become one of the country’s biggest risks in 2027.
Sitharaman attributed part of the market’s weakness to abundant liquidity, which she said makes it easier for investors to exit equities. She said India’s economic fundamentals remain sound, but foreign portfolio investors have sold more than $33 billion in direct Indian equities this year.
The withdrawals have accelerated.
The market retreat has coincided with a shift in global capital toward the United States and Asian economies with stronger exposure to artificial-intelligence hardware. Taiwan and South Korea have attracted substantial flows as semiconductor and data-center demand lifted technology markets. India’s weighting in the MSCI Asia Pacific ex-Japan index has fallen to 10% from 19% several years ago, while Taiwan accounts for 29% and South Korea 22%.
Initial public offerings have also provided an exit route for existing shareholders.
Sitharaman said India would not necessarily be hurt if the global AI rally developed into a bubble and then burst, because the country has not received the same scale of AI-linked investment as other jurisdictions. She said India was no longer a laggard in frontier technology and that investment was being directed toward semiconductor manufacturing.
The broader backdrop remains unsettled. IMF officials meeting in Bangkok said India’s growth had surprised on the upside, while technology demand boosted several Asian economies and energy shocks affected countries reliant on imported fuel. Market coverage also identified elevated crude prices, a stronger dollar and high U.S. Bond yields as pressures encouraging foreign investors to move money elsewhere.