A record number of foreign investors have been pulling out their money, leading to a noticeable downturn in market performance and casting a shadow of uncertainty over the market's future prospects.
In recent months, foreign institutional investors (FIIs) have withdrawn billions from Indian stocks. This exodus has not only reduced liquidity in the market but also created downward pressure on share prices, impacting both large-cap and mid-cap companies.
The U.S. Federal Reserve's recent interest rate hikes have made U.S. bonds and other assets more attractive, prompting investors to reallocate their funds away from emerging markets like India.
Foreign investors have heavily sold off shares in sectors like IT, financials, and consumer goods—previously seen as growth-oriented and promising for foreign capital. As FIIs pull out, these sectors are experiencing added volatility and decreased investor confidence.
The foreign exodus has created a ripple effect, influencing domestic investors as well. Many are now hesitant to invest in Indian equities, fearing further drops in value. This sentiment may lead to reduced market participation and a slower recovery
In response, the Indian government and the Reserve Bank of India (RBI) have been exploring measures to stabilize the market and retain foreign investments. Initiatives include potential reforms to ease regulations, strengthen economic policies, and encourage domestic investments
India’s robust economic fundamentals, growing domestic demand, and expanding digital economy may eventually draw foreign investors back, provided stability returns to the global economic landscape.