Excess liquidity and easy exits are causing equity market underperformance in India, with record foreign outflows posing a major risk for 2027, though fundamentals remain sound.
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01Summary
- 01Finance Minister Nirmala Sitharaman said excess liquidity and ease of exit enabled capital outflows from Indian equities.
- 02India's key benchmark indexes have fallen nearly 12% since January, despite resilient economic growth.
- 03Foreign portfolio investors have sold over $33 billion in direct Indian equities so far this year.
- 04Indian IPOs raised $60.4 billion from 2021 to 2025, with 63% going to existing holders selling shares.
- 05Taiwan and Korea have expanded their MSCI Asia Pacific ex-Japan index weightings to 29% and 22% respectively, while India's share shrank to 10%.
02Why it matters
These trends signal that foreign capital flight from Indian equities could persist, potentially dampening market returns and affecting domestic investors exposed to mutual funds and IPOs.
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