Nirmala Sitharaman warns foreign investment outflows could challenge India in 2027
Hyderabad: Finance Minister Nirmala Sitharaman warned that foreign investment outflows could pose a major challenge for India in 2027. She attributed part of the stock market weakness to investors selling shares and withdrawing their money easily. However, she stressed that India’s economic fundamentals remained strong.
Sitharaman made the remarks on the sidelines of the annual meetings of the International Monetary Fund (IMF) and the World Bank. She explained that ready access to market liquidity allowed investors to withdraw their investments quickly.
Meanwhile, global investment flows were increasingly moving towards artificial intelligence (AI), she said. Investors were showing greater interest in Taiwan and South Korea because of companies linked to AI. Sitharaman also expressed concern about funds shifting towards the United States and AI-related sectors.
Foreign investment outflows amid global AI investment shifts
Sitharaman said India could face a relatively limited impact if the global AI investment boom slowed and markets fell. She attributed this resilience to India’s comparatively lower exposure to that investment trend. At the same time, she said India had not fallen behind in advanced technology and was investing in semiconductor manufacturing.
India’s main equity indices had fallen by around 12 per cent so far this year. Despite continuing uncertainty over international trade and geopolitical tensions, the Indian economy continued to grow. Nevertheless, foreign investors had withdrawn substantial funds from domestic markets.
According to data from the National Securities Depository Limited (NSDL), foreign portfolio investors (FPIs) had sold shares worth more than $33 billion in Indian equities so far this year. However, on October 16, foreign institutional investors (FIIs) returned as net buyers after selling shares for 15 consecutive trading sessions. They purchased shares worth about ₹1,166 crore that day.
By contrast, domestic institutional investors (DIIs) ended a 45-session buying streak. They sold shares worth approximately ₹3,661 crore, according to the figures cited in the report.