Sitharaman Flags Foreign Capital Outflows As Key Challenge For India In 2027

New Delhi, Oct 19 (KNN) Finance Minister Nirmala Sitharaman has attributed part of the recent weakness in Indian equities to the ease of selling holdings, while maintaining that the country's economic fundamentals remain sound.

Speaking on the sidelines of the IMF and World Bank annual meetings, Sitharaman told CNBC that easy access to liquidity was enabling investors to exit markets more readily. She also flagged sustained capital outflows as a key challenge for India in 2027.

Domestic equity benchmarks have declined nearly 12 per cent so far this year amid trade uncertainty and geopolitical tensions, despite continued economic growth.

Foreign Capital Outflows Raise Concerns

Sitharaman said global investment flows towards artificial intelligence (AI) and the US market were a concern for India, as countries such as Taiwan and South Korea attracted greater investor interest due to their exposure to AI-linked companies.

She said India had not received investment flows comparable to those directed towards AI-related opportunities in other markets. However, she added that India could be less exposed to a reversal in AI-linked investments if a global sell-off followed a collapse in the investment boom.

According to data from depository NSDL, foreign portfolio investors (FPIs) have sold more than USD 33 billion worth of Indian equities so far this year.

On October 16, foreign institutional investors turned net buyers after 15 consecutive sessions of selling, purchasing equities worth around Rs 1,166 crore. Domestic institutional investors (DIIs), meanwhile, recorded net sales of approximately Rs 3,661 crore, ending a 45-session buying streak.

India Expands Advanced Technology Investments

Sitharaman said India was no longer lagging in advanced technology and was investing in semiconductor manufacturing.

Her remarks come amid a shift in global investment flows towards AI-related companies and concerns over the impact of sustained foreign capital withdrawals on domestic equity markets.

(KNN Bureau)