Relentless Selloff: FIIs pull out 10 years’ worth of India equity inflows

The aggregate net investments by foreign portfolio investors in local shares stood at Rs 7.3 trillion as of June 1, the lowest level since 2016, according to data from National Securities Depository Ltd. The figures sums investments or withdrawals for each year since 1993 into Indian equities.

Indian equities, once touted as an emerging-market darling, are losing their relative appeal as the oil shock from the US-Iran war dims the outlook for the world’s fastest-growing major economy and global capital shifts toward economies directly tied to the AI infrastructure buildout. The country’s stock market has fallen out of the world’s top five by value for the first time in three years, trailing Asia’s tech hubs of Taiwan and South Korea.

Bloomberg

AI could replace as much as 15% of highly paid knowledge workers in the US over the next several years, a trend that may have significant implications for India’s economy, Carson Block, founder of investment research firm Muddy Waters Capital LLC, said last week.

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“We expect FPI flows to stay muted, given India’s low attractiveness versus other EM markets,” Kotak Institutional Equities strategists including Sanjeev Prasad wrote in a recent note. India’s near-term earnings growth is expected to be slower than commodity- and tech-oriented EM peers, while the country has little exposure to the AI and semiconductor cycle that may continue for another one-to-three years, they said.

Global funds’ ownership in listed companies has shrunk to 15% from almost 20% a decade ago, Venkatesh Balasubramaniam, a strategist with JM Financial Institutional Securities, wrote in a note. Domestic mutual funds, buoyed by steady flows from retail investors, now control nearly 20% of the market, he said.