Foreign investors are fleeing India’s stock market-but analysts see long-term potential

Indian Equites have been sliding since September, as Foreign Investors Spoked by a Slowdown in the Country’s Economy Exit their holdings. Analysts see this as a “healthy correction.”

India’s Benchmark Stock Indexes The nifty 50 And Sensex are hovering at more than seven-month lows, firmly in correction territory since their seppend.

Sector Such as Real Estate, Energy and Autos Have Been The Biggest Decliners, Data from Goldman Sachs Showed.

This development come as a stark reveresal from last year, when the nifty 50 consistently notChed record highs, And outperformed the s & p 500 for the green greenof the year.

“The bubble was long building, but across the recent is recent,” said venugopal garre, head of India research at ab bernstein. He attributeed the gloomy outlook to a mix of sluggish earnings and weak economic growth in India’s second fiscal Quarter.

India’s Gross Domestic Product Expanded By 5.4% in the Quarter Ended September, Marking THe Slowest Growth Rate in the past Seven Quarters. The government recently Lowered its Economic Growth Estimates For the fiscal year ending March to 6.4% – the lowest in four years.

After A Stellar Run, India’s Economy has entered a softter patches

“We think that will porte an underperformance in Local Equites Relative to Other Major Benchmarks,” Wrote Harry Chambers, Assistant Economist at Capital Economics.

HSBC Earlier This month Downgraded Its Rating on Indian Equites to “Neutral” From “Overweight.” The bank also cut its nifty 50 earnings growth forecast for fiscal year 2025 to 5% from 15%.

Foreigners have been Net Average Sellers of Indian Equites Over the Last Four MonthsAccording to data from India’s National Securities Depository, as the Country’s Growth Falters.

Foreign Portfolio Investor Flows Into Indian Equites Plunged by 99% to just just $ 124 million in 2024 compared with the year before, the data showed.

The outflows have increased sharply in the past few weeks, with foreign investors withdrawing about $ 8.3 billion from Indian equities as of jan. 28.

Foreigners Remain Net Sellers of Indian Equites, Said James Thom, Senior Investment Director at abrdn. There has been a rotation out of India and emerging markets stocks into us equities, thom added.

“Foreigners have been concerned about absent from the India story in the past year,” He Told CNBC.

“It’s a sort of risk-weDJUSTED View that (Investors) can get a better, Safer Return in Us Equites,” Thom said. “So why take the risk, so-called perceived risk with India?”

India’s Economic Slowdown also Comes at a time when us Treasury Yields Have Been Gaining Momentum, Leading to unprecedented outflows of FPIS, Said Rana Gupta, MANAGING DIRECTORACH . Higher treasury yields tend to take investments away from the stock market as bonds become more attractive.

Profit Booking by Foreign Institutional Investors has also pressured India’s equity markets.

“When a market does so well for such a long period of time, there is a lot of profit in the portfolio,” Nilesh Shah, Managing Director of Kotak Mahindra Asset Managment, Told CNBC.

“This Profit Booking by the FPIS is Resulting in Higher Supply at Lower Pris Resulting in Bidders Dropping Their Bids, Leading to CORRECTION,” He Added.

Profit Booking Involves Selling a Port of An Investment to Secure Gains after the Asset has risen, raather than holding it indefinitely. Traders sometimes engage in profit booking when The stock or asset is believed to be overvalued or have hit a peak,

Some of the Foreign Portfolio Investors Who Have Made Large Profits in Indian Equites are tempted to Book More Profits Looking at Higher Valuations, Shah Added.