Global Funds Cut India Equity Allocation as Foreign Holdings Drop to 17-Year Low
nashnova research
Foreign ownership of NSE-listed Indian companies has fallen to a 17-year low, with several funds cutting India exposure to zero; India has gone from one of the hottest emerging markets to Asia's least-favoured in the latest BofA survey.
Why are foreign funds leaving India en masse?
Singapore-based family office Reed Capital Partners fully exited Indian equities about a month ago. Its CIO was blunt: "There aren't too many good stories left to tell in India."
Janus Henderson Investors and Vantage Point Asset Management have also cut India exposure to zero over the past year.
This means → This is not a tactical trim by one or two funds. It is a collective vote of no confidence in India's growth narrative by active managers.
Where is the money going instead?
The core logic: India lacks an AI investment theme, while South Korea and Taiwan offer stronger returns through AI-linked assets.
Dubai-based Global CIO Office says roughly 30% of its clients — family offices and wealth managers — have exited India entirely, redirecting capital into Taiwanese and Korean tech stocks.
In plain terms = Global capital chose between markets with an AI story and markets without one. India landed in the second column.
Is the Indian market actually expensive?
India trades at roughly 17.6× forward P/E, slightly below its own historical average — but its premium over the MSCI EM benchmark still stands at 77%.
This means → India may look cheaper versus itself, but it remains far pricier than its peer group — and that gap has driven roughly $25 billion in net foreign outflows this year.
The rupee has fallen to a record low against the dollar, the worst performer among Asian currencies, further eroding foreign investors' dollar-denominated returns.
Why haven't Modi's reforms retained foreign capital?
Janus Henderson portfolio manager Sat Duhra acknowledges the visible results — GST unification, real-estate reform, bankruptcy courts.
"But these haven't addressed the real issues — jobs, building manufacturing, and attracting FDI."
This reflects a deeper tension: reforms have improved existing rules, but have not generated enough new productive capacity to justify the valuation premium.
Who is keeping the Indian market from collapsing?
Domestic Indian institutions have net-purchased roughly $60 billion in equities this year. Small-caps, buoyed by data-centre construction, have been a bright spot.
Morgan Stanley remains relatively bullish, projecting the BSE Sensex to reach 89,000 by next June in its base case (roughly +19%) and 100,000 in a bull scenario.
Yet cracks are visible: the NSE was forced to scale back its own highly anticipated IPO this week after investors pushed back on valuation.
What would it take for foreign capital to return?
The Nifty 50 index is hovering near mid-2024 levels, on track to end a decade-long streak of annual gains.
In plain terms = The "buy India with your eyes closed" playbook of the past ten years has stopped working. Restarting it requires a new thesis.
Whether foreign capital returns hinges not on headline GDP growth, but on whether India can deliver tangible progress in manufacturing and FDI.
市场有风险，内容仅供研究参考，不构成投资建议。