Worst global money exodus barely bruises India

State Bank Of India

08/07/2026 04:59

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Shritama Bose

    MUMBAI, July 8 (Reuters Breakingviews) - India has survived a massive withdrawal of hot overseas money. In fact, the domestic stock market barely flinched. Now falling oil prices and a search for shelter from AI exuberance are luring foreigners back in after they pulled out a record $48 billion over the past year and a half. But bargains may prove scarce thanks to local mom-and-pop investors setting a firm floor for valuations.
Granted, perceptions of the country being an AI laggard and a major economic victim of the Iran war precipitated a 15% drop in the Nifty 50 index .NSEI in the first three months of the year. A partial recovery since leaves the metric essentially flat over the past 12 months. Now global funds are returning, if gingerly, investing a net $401 million into Indian equities in the first week of July.
They're coming back to valuations that have barely budged. The MSCI India index .MIIN00000PIN is trading at 20 times forward earnings, on a par with its 10-year average. That's due in large part to the 335 billion rupees ($3.5 billion) of monthly inflows that retail investors pour into equity and hybrid schemes of local asset managers, fuelled partly by a wildly successful decade-long industry publicity campaign.
It's some comfort for companies planning mega initial public offerings this year, from Reliance Industries' RELI.NS telecom business Jio Platforms to bourse operator National Stock Exchange. What appears to be stable and sizeable domestic interest in equities boosts issuers' bargaining power against domestic money managers like State Bank of India-backed SBI.NS SBI Funds and $17 billion ICICI Prudential Asset Management IICL.NS, which are under pressure to swiftly deploy chunks of the inflows they receive. The combined $7 billion the two companies seem likely to raise is equivalent to two months of equity fund inflows.
To be sure, there were some cracks in retail confidence too. Months of poor returns, as well as the Middle East conflict, pushed inflows to a one-year low in May. Earnings at Nifty 50 companies, which Kotak Institutional Equities estimates grew 8% during the financial year ended March 31, may test the patience of investors used to double-digit increases.
Ultimately, tight capital controls put a lid on domestic money leaving the country, and Indian savers no longer like low-yielding bank deposits. Combined with a more sizeable return of foreign cash, that could yet push stocks up. But locals' ability to roll with the punches is a victory in itself.
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CONTEXT NEWS
Foreign investors pumped a net $401 million into Indian equities during the first five sessions of trade in July, showed data from NSDL.   

(Editing by Antony Currie; Production by Ujjaini Dutta)
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