Nirmala Sitharaman attributes India's market weakness to easy liquidity and exits

Finance Minister Nirmala Sitharaman has attributed the recent weakness in India's equity market to excess liquidity and the ease with which investors can exit their positions. Despite benchmark indexes falling nearly 12% since January, Sitharaman maintained that the country's economic fundamentals remain sound.

Sitharaman identified sustained capital outflows as a significant risk for India heading into 2027. She noted that capital is currently flowing toward the United States and sectors linked to the artificial intelligence boom, areas where India has seen less direct investment compared to countries like Taiwan and South Korea. Data indicates that foreign portfolio investors have sold more than $33 billion in Indian equities so far this year.

In contrast to foreign investor exits, domestic capital remains resilient. Indian equity mutual funds have recorded net inflows every month since March 2021, signaling strong domestic sentiment despite geopolitical tensions and trade uncertainty.