All Asset Classes Bearish as FPI Exodus Hits India
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- FPI selling has drained Indian equities: net outflows of ₹1.6 trillion in calendar 2025 and ₹2.2 trillion till May 2026, pushing returns negative since the September 2024 peak, with mutual fund SIP inflows now the main pillar of support
- Indian equities trade at a premium PE to other emerging markets but corporate EPS growth has lagged expectations, making 'GDP growth ≠ EPS growth' the core problem for foreign investors
- Global equity concentration is extreme: Taiwan's $5T market cap is 5x its $1T GDP with TSMC alone at 40%; South Korea's $4.9T cap is dominated by Samsung and SK Hynix at 50%+; Nvidia's $5.1T market cap exceeds India's entire GDP
- Bond yields have moved up across the US, Europe, and India, with the European Central Bank and Bank of Japan already raising rates while markets brace for a US Fed and RBI rate hike
- Gold has corrected from its February 2026 peak despite West Asia tensions, as the US Fed's expected rate hike has strengthened the US dollar — the standard inverse dollar-gold relationship
- AI and semiconductors remain the dominant global investment theme, but 'cracks are visible' in the semiconductor trade even as valuations hit stretched levels that the author warns cannot be chased
Why it matters: With $7+ trillion in FPI selling pulling capital out of emerging markets like India since late 2024, retail investors dependent on SIP flows are now the marginal buyer — a structural shift that exposes the Indian market to concentrated risk if domestic inflows falter, while stretched AI/semiconductor valuations in Taiwan, South Korea, and the US raise the odds of a sharp correction when sentiment turns.
