India Strategy: Outflows Fade But Re-entry Waits

Foreign selling of Indian equities is nearing exhaustion after record outflows, but structural and valuation headwinds compared to North Asia are likely to delay the return of foreign capital.

Key Takeaways

• 1.Foreign ownership of Indian equities has fallen to a 14-year low, slipping below domestic institutional investor (DII) levels for the first time in over 20 years.
• 2.Foreign selling is likely nearing exhaustion, with year-to-date outflows reaching a record $22bn; incremental downside risk is estimated at only $4-5bn.
• 3.Foreign re-entry into India is currently impeded by high growth-adjusted valuations compared to North Asia, earnings downgrade cycles, and ongoing AI concerns.

Table of Contents

• Outflows Fade, But Re-entry Waits
• 1. Foreign ownership has retreated to historical lows, below DIIs
• 2. Foreign selling may be near its exhaustion
• 3. Inflows may wait awhile
• 4. Alpha picks?
• Appendix: Top stock-level ownership changes
• Disclosure Appendix

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