Kolkata: The FIIs (foreign institutional investors) have pulled out investments worth about Rs 1.98 lakh crore in 2025 — between January and early October. Reports state that the total sale of Indian equities touched a figure of Rs 3.19 lakh crore in 21 months. Worse, there is no quick end in sight of the selling binge by the FIIs. Morgan Stanley’s chief equity strategist of India, Ridham Desai has told a news channel that there are three key reasons for the inflow of foreign investments bypassing the Indian markets.
If there is one which is going to unite the common investors as the new investment year kicks in, it is certainly going to be the prayer to restore foreign fund flow into the country’s stock markets.
The AI factor
The chief equity strategist of India of Morgan Stanley believes that one of the shortcomings of India has been the absence of the adoption of AI (artificial intelligence). The developed world India has moved into AI trade, said Desai but India has no Al trade.
“Markets with a large proportion of Al trade, excluding Europe trade, defence and Al have been driving a lot of markets up 20-40%. That’s why markets are up last 12 months, and that’s why it feels India has been in a bear market,” Ridham Desai told NDTV Profit.
Valuation concerns
When FIIs began pulling out investments from the Indian market last year, they did so mainly out of stretched valuation concerns. Too much money chasing too few stocks resulted in overstretched valuations. Desai pointed to the continuation of the same concerns, despite the apparent decline of the market from the heights of 2024. “One is that they still have problems with India’s absolute valuations, even though relative valuations have improved significantly… One year ago, China was at nine times earnings, India was at 20 times. China is now at 15 times, and India is still at 20 times,” Desai told the channel.
Data point to the fact that Nifty 50 has been more or less flat in the past one year, while many global indices have generated positive returns. Nifty is trading at 22.23 times its price to earnings, contrasted with 17.63 multiple for the Chinese index.
Strengthening domestic investor
The Morgan Stanley expert also highlighted the emerging strength of the domestic investors in India as a possible reason that has, in a way, kept the foreign investors away. He remarked that domestic investors who have become favourably inclined to invest in equities are not wasting any opportunity to buy stocks and they are soaking up the selling pressure in the market. Foreign investors are up against the domestic bid, which means they need to get share prices a lot higher because domestic investors actually offer stock,” Desai said.
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