According to Reuters, this year, foreign investors in the Indian stock market have withdrawn more than $17 billion, dropping to the lowest point in years, with net flow of foreign funds reaching $20 billion in 2023.This also made India the worst market for outflows of foreign portfolio funds in Asia.The Sri Lanka Guardian said on the 27th that India is stepping up reforms in the financial sector to stabilize foreign investment, measures aimed at easing access to foreign investment, expanding credit channels, and encouraging corporate lending to alleviate concerns about policies such as U.S. tariffs impacting the Indian economy.

Reported that foreign investors in the Indian stock market have withdrawn more than $17 billion in funds, chart of the stock market (data map)

Global investors are pulling out of India at a staggering rate.

India's "Business Standard" reported that a report released by "Ilara Capital" shows that global investors are withdrawing from India at an alarming rate. Geographically, the largest divestments since July were made by US funds ($1 billion), followed by Luxembourg ($765 million) and Japan ($365 million), suggesting a broad investor retreat. Central to this trend is a shift in global emerging market portfolios. India's allocation to global emerging markets funds has slipped to 16.7%, the lowest level since November 2023, compared with a peak of 21% in September 2024. Meanwhile, China's share soared to 28.8%, reflecting a strong pivot from active managers. For India, persistent capital outflows highlight the volatility that global capital flows may bring to the domestic market. Given that India's allocation to the GEM portfolio is currently at multi-year lows, short-term market volatility is likely to increase.

After U.S. President Trump announced tariffs on multinationals in April this year, India became one of the first major markets to rebound, attracting investors who view India as a haven of refuge in the global trade tensions.

According to Reuters, due to concerns about the slowing profitability of export-oriented industries and the macro prospects, the U.S. imposed tariffs, the outflow of foreign capital in the Indian stock market accelerated, causing damage to portfolio flow, affecting economic growth and expanding India's trade deficit.

The Indian Times said that the U.S. immigration department's adjustment of the H-1B temporary work visa application policy has significantly affected several Indian software and service outsourcing companies, with the need to re-evaluate both deployment costs and project schedules, leading India's important service export industry to be under pressure.

The adjustment of H-1B temporary work visa application policy by the U.S. immigration department has significantly affected many Indian companies (data map)

Liu Xiaosheng, deputy professor at the Institute of International Economics and Trade at the Central Financial University, said in an interview with reporters at the Global Times on the 28th that the withdrawal of foreign investment from India is mainly driven by domestic and foreign factors. The main external cause is the stronger dollar that triggers the return of global capital from emerging markets. Internal factors are more crucial: Indian stock market valuations are high for the long term, there is reconsideration pressure; at the same time, corporate profit growth is generally less anticipated, and it is difficult to support high valuations.

Multi-factor overlap led to foreign capital outflows. The Indian Times said that the continued weakness of Indian enterprise profits hit the market. The data showed that the profits of Indian companies in the MSCI index are expected to grow by 5% in 2025, down from 8% last year. Foreign capital outflows have spread to the foreign exchange market, lowering the exchange rate, eroding the attractiveness of local assets. Since 2025, the dollar-to-USD exchange rate has dropped by more than 3.7%. The stock market pressure is obvious, and selling led to the Indian stock market benchmark index Nifty 50 seldom losing other indices in the region. As of September, the benchmark index has been five consecutive months behind the MSCI Asia-Pacific index, the longest since 2013.

According to a report by the Business Standard on the 27th, a survey by the National Applied Economic Research Council, a Delhi think tank, showed that India's business confidence in the second quarter of this fiscal year weakened compared with the first quarter. This was the first time after three consecutive quarters of improvement. There was a decline. The investigation was conducted in September, days after the Trump administration imposed a 50% tariff increase on most Indian goods and the Indian government announced a goods and services tax reform.

The picture shows the Indian rupee (data map)

Reported that few analysts expect the momentum of foreign investment outflows from India to reverse in the short term. Chanana, chief investment strategist at Saxo Bank in Singapore, said that to truly achieve a reversal, investors need to see: the clarity of U.S. trade and immigration policies, the stability of the rupee, and evidence that the Indian stock market is currently valued reasonably...