Indian stocks: Sitharaman flags easy exits and foreign outflows

Finance Minister Nirmala Sitharaman has pointed to a downside of India’s liquid equity markets: investors can leave as readily as they can enter. In comments reported on October 19, she maintained that India’s economic fundamentals were sound while identifying sustained capital outflows as a key risk for 2027.

The Economic Times Markets reported that Sitharaman made the remarks in a CNBC interview on the sidelines of IMF–World Bank meetings in Bangkok. Her assessment comes as the Nifty and Sensex have delivered no positive returns over two years and fallen nearly 12% since the start of 2026, according to the report.

Foreign selling nearly cancels nine years of buying

Foreign investors have withdrawn almost $63.6 billion from Indian equities since October 2024, against $63.5 billion invested over the preceding nine years. The report cites National Securities Depository Limited data showing cumulative foreign equity flows since October 2015 at approximately minus $110 million—effectively wiping out the earlier net inflows.

The selling has accelerated in 2026. The reported year-to-date withdrawal is $32.8 billion, compared with $18.9 billion during 2025. March recorded the largest monthly exit, at $12.7 billion, followed by $6.5 billion in April and $5.2 billion in June.

The article separately puts this year’s selling in direct Indian equities at more than $33 billion. It does not reconcile that figure with the $32.8 billion total, so the two should not be treated as interchangeable measures.

Domestic inflows provide buyers—and an exit route

Domestic investors have continued to supply money to the market despite the foreign retreat. Indian equity mutual funds have registered net inflows every month since March 2021, the report says, citing the Association of Mutual Funds in India.

That demand has also helped existing shareholders sell. Multinational companies, private equity funds and foreign investors have used public markets to reduce or exit holdings at a premium, according to the account.

Sitharaman’s liquidity argument concerns this ease of selling; it is not a claim that India’s economic fundamentals have deteriorated. The report also identifies higher US Treasury yields, a stronger dollar, elevated oil prices and concerns about relative investment returns as factors behind the foreign withdrawal.

AI investment shifts reshape regional competition

Market watchers cited in the report see additional challenges in India’s limited exposure to artificial intelligence and semiconductor investment themes, alongside currency depreciation. Taiwan and South Korea have benefited from stronger investor interest in AI-linked companies.

A Goldman Sachs report dated October 8, cited in the account, puts Taiwan’s weight in the MSCI Asia Pacific ex-Japan Index at 29% and South Korea’s at 22%. India’s weight is reported at 10%, down from 19% a few years earlier. These figures describe index composition, rather than amounts of capital withdrawn.

Sitharaman acknowledged concern about capital moving towards AI and the United States. But she argued that India would not suffer spillover damage from a global AI bubble bursting because it had not attracted the same kind of AI investment as other jurisdictions. That is the minister’s assessment of potential exposure, not an established outcome.

She also said India was advancing in frontier technology, pointing to investment in semiconductor manufacturing. Her remarks distinguish the immediate challenge of attracting portfolio capital from the country’s effort to build technology production capacity.