Indian Finance Minister Nirmala Sitharaman attends the annual meetings of the International Monetary Fund (IMF) and World Bank on Thursday, October 15, 2026 in Bangkok, Thailand.
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According to Finance Minister Nirmala Sitharaman, excess liquidity in the Indian stock market has contributed to the underperformance and is likely to continue.
“People are even getting out of stocks easily because liquidity is easy and available,” Sitharaman told CNBC in an exclusive interview on the sidelines of the IMF-World Bank meeting in Bangkok on Friday. However, he said the fundamentals of the Indian economy were “good”.
India’s main benchmark index has fallen nearly 12% since January, according to LSEG data, even as the country’s economic growth remained resilient amid trade uncertainties and geopolitical shocks. Sitharaman said continued capital outflows will be one of the biggest risks for India in 2027, as India has seen record outflows of foreign investors from its stock markets.
Still, domestic capital continues to flow into the market. Indian equity mutual funds have recorded net inflows every month since March 2021, according to data released by industry body Indian Mutual Funds Association earlier this month.
Multinational corporations, private equity funds, and foreign investors were able to partially or completely exit their investments at a premium. A total of $60.4 billion was raised in initial public offerings in India between 2021 and 2025, of which a “staggering” $37.7 billion, or 63% of the total proceeds, went to existing holders who sold their shares to the public, according to an August report from EY.
Anti-AI play
Foreign portfolio investors have directly sold more than $33 billion in Indian stocks so far this year, according to Indian deposit trading company NSDL. While India has earned a reputation as anti-artificial intelligence trade, markets with AI champions such as Taiwan and South Korea are attracting strong investment flows.
He added that capital flight to AI and the US to other countries to invest in other areas is a “concern”.
According to an October 8 report by Goldman Sachs, Taiwan currently has the largest market weight in the MSCI Asia-Pacific Index (excluding Japan) at 29%, while South Korea ranks second at 22%. He added that India’s share has shrunk to 10% from 19% a few years ago.
However, with cracks appearing in the global AI gathering, Sitharaman said India would not be “damaged” by the spillovers if the bubble bursts. India has not received “investments like AI in different jurisdictions”, she said.
Sitharaman, India’s longest-serving finance minister, added that the South Asian country is “no longer lagging behind” in frontier technology and investments are being made to set up semiconductor manufacturing.
