Domestic institutions have been absorbing FPI selling through the course of the war. Do you think FPIs will return to Indian markets given the possible lasting impact of the war?
FPIs have been net sellers for several months, driven by capital rotation towards AI themes, relatively higher valuations for Indian markets, and an earnings slowdown. Most recently, FPI outflows have accelerated due to the sharp rise in oil prices and its negative implications for India’s growth. Over the past month, FPIs have sold nearly $13 billion in equities, which is one of the highest recorded figures, while domestic institutions continue to be net buyers, providing critical support to the markets. The war has created significant macroeconomic uncertainty, and FPIs are unlikely to return aggressively until a meaningful de-escalation occurs. Post the recent correction, market valuations have moderated to below the long-term average, and a de-escalation at this stage could bring interest back to Indian equities.
