Sitharaman Flags $33 Billion FPI Outflows As Indian Stock Markets Fall Nearly 12% This Year

Finance Minister Nirmala Sitharaman has expressed concern over sustained foreign capital outflows and high market liquidity, even as Indian equities struggle amid geopolitical uncertainty and shifting global investment trends.

On the sidelines of the International Monetary Fund (IMF) and World Bank meetings in Bangkok on Friday, Sitharaman said investors could exit positions easily because of abundant liquidity.

However, she maintained that India's economic fundamentals remained sound. Benchmark equity indices have declined nearly 12% since January, while the market has delivered virtually no returns over the past two years.

Foreign Investors Withdraw Over $33 Billion From Indian Equities

Foreign portfolio investors (FPIs) have sold Indian shares worth more than $33 billion this year, according to National Securities Depository Limited (NSDL) data.

Sitharaman identified continued capital outflows as a major risk for 2027.

She noted that international investors were increasingly directing funds towards artificial intelligence (AI) opportunities in the US, Taiwan and South Korea.

However, India's relatively limited exposure to AI-related market gains could provide some protection if the global technology rally reverses.

The Finance Minister also highlighted India's efforts to develop domestic semiconductor manufacturing capabilities.

On Oct 16, foreign investors became net buyers after 15 consecutive selling sessions, purchasing equities worth approximately ₹1,166 crore.

Domestic institutional investors, meanwhile, sold shares worth nearly ₹3,661 crore, ending a 45-session buying streak.

Mutual Fund Inflows, SIP Investments Provide Support

Domestic mutual fund investments have helped cushion Indian equities against sustained overseas selling.

Equity mutual funds attracted ₹38,307 crore in September, their highest inflows in five months, according to the Association of Mutual Funds in India.

Inflows increased 31% from August, extending the industry's positive monthly streak to 67 months.

Mid-cap funds received ₹7,845 crore, while small-cap schemes attracted ₹9,039 crore.

Systematic investment plan (SIP) contributions reached a record ₹32,490 crore, partly offsetting September's foreign portfolio outflows of $3.75 billion.

Separately, Sitharaman called for stronger municipal finances, public investment, development finance and private capital to build financially sustainable cities.

She said combining these funding sources would help urban centres attract long-term investment while strengthening infrastructure and financial resilience.