India’s Finance Minister blames easy exits and excess liquidity for equity market's underperformance — SkimNews
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- Nirmala Sitharaman said excess liquidity and easy exits have fueled India's equity underperformance, while calling the country's economic fundamentals "fine" in a CNBC interview on the sidelines of the IMF-World Bank meetings in Bangkok.
- India's key benchmark indexes have slipped nearly 12% since January per LSEG data, despite resilient economic growth amid trade uncertainty and geopolitical shocks.
- Foreign portfolio investors have sold more than $33 billion in direct Indian equities so far this year per NSDL data, with Sitharaman identifying continued capital outflows as a top risk for India in 2027.
- Indian equity mutual funds have recorded net inflows every month since March 2021, masking the foreign exit — and between 2021 and 2025, Indian IPOs raised $60.4 billion, of which 63% ($37.7 billion) went to existing holders cashing out to the public (EY report, August).
- India has been branded an "anti-AI trade" as capital rotates to AI-heavy markets: Taiwan now holds the largest MSCI Asia Pacific ex-Japan weighting at 29%, Korea sits at 22%, and India's share has compressed from 19% to 10% (Goldman Sachs, Oct. 8).
- Sitharaman said India would not be "hurt" by any AI-bubble spillover because the country has not attracted AI-kind investment, while also pitching India as "no longer a laggard" in frontier tech with semiconductor manufacturing investments underway.
Why it matters: With over $33 billion in year-to-date foreign equity outflows and India's MSCI Asia Pacific ex-Japan weighting roughly halved from 19% to 10%, the country faces a structural re-rating as capital rotates toward AI-exposed Taiwan (29%) and Korea (22%). Domestic mutual funds have absorbed every month of foreign selling since March 2021, masking the depth of the exit — and 63% of $60.4 billion in recent IPO proceeds enriched insiders cashing out rather than funding new corporate capacity.
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