Archive · 29 Sep 2026
Foreign Investors Pull $40 Billion From Indian Equities
Foreign investors have taken a large amount of money out of Indian stocks.
This happened even though India’s economy continued to grow strongly.
A report from Bernstein says that economic growth alone is no longer enough to attract foreign money.
The difference between Indian interest rates and US interest rates also seems less important than before.
The value of the rupee now matters more to investors who use US dollars.
If the rupee falls, their returns can become smaller even when Indian stocks rise.
High stock-market valuations may also be discouraging investors.
The report says foreign investment could stay mostly flat unless India builds more globally competitive companies.
Foreign institutional investors withdrew around $40 billion from Indian equities over two years, despite India’s strong economic expansion.
A Bernstein report said GDP growth and India-US interest-rate differences have become less influential in determining foreign investment flows.
Domestic institutional investors invested nearly $300 billion in Indian equities over the past decade, compared with about $4 billion in net foreign investment.
The rupee’s movement against the US dollar had a 72.9% correlation with foreign investment flows in the latest period analysed.
Bernstein expects foreign flows to remain flat to modestly positive over the next 12 months, with a stronger revival depending partly on globally competitive Indian businesses.
- Who
- Foreign institutional investors, domestic institutional investors, and analysts at Bernstein.
- What
- Foreign investors withdrew large sums from Indian equities while domestic investors supplied substantial capital.
- When
- Over the past two years; the Bernstein report was dated September 21, and its valuation period ran from December 2023 to September 2026.
- Where
- Indian equities and the Indian financial market.
- Why
- The article identifies a weaker relationship between foreign flows and economic growth or interest-rate differences, alongside rupee weakness and high valuations.
- Reported foreign withdrawal
- Around USD 40 billion from Indian equities over two years.
- Bernstein outflow measure
- Combined FII outflows were USD 56.3 billion in the latest 24-month period, compared with USD 38.6 billion of inflows in the preceding 24 months.
- Domestic institutional investment
- Nearly USD 300 billion over the past decade.
- Foreign net investment over decade
- Around USD 4 billion in Indian equities.
- Rupee-flow correlation
- 72.9% in the latest period analysed.
- Relative valuation
- India’s average relative valuation was 162% between December 2023 and September 2026.
- Forecast
- Foreign flows are expected to remain flat to modestly positive over the next 12 months.