Global Funds Continue to Exit as Net Investment in Indian Equities Falls to Decade Low
Alina Collins
Cumulative net foreign portfolio investment in Indian equities has fallen to ₹7.3 trillion, the lowest since 2016; an oil-price shock, an AI-driven capital shift, and slowing earnings growth are eroding the $4.9 trillion market's appeal to global money.
How much has left?
As of June 1, foreign portfolio investors (FPIs) held a cumulative net investment of ₹7.3 trillion in Indian equities — the lowest since 2016.
In plain terms = this is not one year's flow. It totals every annual net inflow and outflow since 1993 — the running tab of "how much foreign money is still in Indian stocks."
India's stock market has dropped out of the global top five by capitalization for the first time in three years, falling behind Taiwan and South Korea.
Why are they leaving?
Oil-price shock: The US–Iran conflict has pushed crude higher, squeezing growth prospects for the world's fastest-growing major economy. India is a major oil importer — higher crude means higher costs and thinner margins.
AI capital shift: Global capital is concentrating in economies tied directly to AI infrastructure. Taiwan and South Korea — semiconductor manufacturing hubs — are the beneficiaries, while India has limited exposure to the AI and chip cycle.
Slower earnings: Kotak strategist Sanjeev Prasad notes Indian corporate earnings growth is expected to lag commodity- and tech-led emerging-market peers. This means → given the same "emerging market" label, money flows first to where profits are growing faster.
How big is the AI threat to India?
Muddy Waters Capital founder Carson Block warned that AI could replace up to 15% of high-paying US knowledge workers within the next few years.
This reflects a signal especially dangerous for India — its economy relies heavily on IT outsourcing and knowledge-service exports. If US companies substitute AI for those roles, India's core export engine takes a direct hit.
Who is picking up the slack?
Global funds' share of Indian listed companies has fallen from nearly 20% a decade ago to 15% today.
Domestic mutual funds, fed by steady retail inflows, have risen to roughly 20% — overtaking foreign institutions as the largest institutional holder.
In plain terms = foreign money left, but Indian retail investors kept buying through funds and propped up the market. The open question: if foreign outflows continue, can domestic retail money carry the load alone?
Content is for reference only, not financial advice.