Finance Minister Nirmala Sitharaman has attributed the recent weakness in Indian equities partly to the ease with which investors can exit their positions, warning that excess liquidity in the market could continue to weigh on performance.
“Because of the ease of liquidity, ease of availability, people are even exiting easily,” Sitharaman told CNBC in an exclusive interview on the sidelines of the IMF-World Bank meetings in Bangkok on Friday. She, however, said the fundamentals of the Indian economy remained “fine”.
India’s benchmark stock indexes have fallen nearly 12% since January due to trade-related uncertainty and geopolitical disruptions. Sitharaman identified sustained capital outflows as one of the biggest risks facing the country in 2027. The markets have delivered zero returns in the last two years.
Foreign portfolio investors have sold Indian equities worth more than $33 billion so far this year, according to NSDL data. India has increasingly been viewed as a market left out of the artificial intelligence investment boom, while countries such as Taiwan and South Korea, home to major AI-related companies, have attracted substantial foreign investment.
“The flight of capital toward AI and the US, which otherwise moves toward different countries for different sectoral investments, is a concern,” Sitharaman told CNBC.