India Among Weakest-Performing Major Equity Markets Globally, FPIs Moving to Other Countries
New Delhi: While the Sensex and Nifty registered record highs last week, India’s stock market is among the weakest-performing major equity markets in the world, a phenomenon that in recent years has resulted into foreign portfolio investors (FPIs) withdrawing funds from India and moving to other markets, an analysis by Indian Express has revealed
According to newspaper's analysis, the Sensex has risen only 8.42% on a year-on-year basis. On the other hand, in the same period, several major global indices have registered substantial highs, which reflects how India overseas investors are now preferring other countries ahead of India.
Among other countries, South Korea rose by 60%, driven by strong export momentum and technology-led recovery, while Mexico registered a high of 62.29% owing to good capital flows and favourable external conditions, reported Indian Express.
Along with other continents even other Asian markets performed way better than India, with Hong Kong registering a jump of 33.13%, Japan 31.53%, and Spain 40.63% on a year-on-year basis, a trend that shows the overall interest of the international investor for value markets and opportunities outside India.
At the same time, European markets continued to deliver excellent returns, with London rising to 17.29%, Italy by 29.75% and Brazil to 26.58% on a Y-o-Y basis.
Even though China has been struggling with growth anxieties and structural challenges, it still managed to beat India with a return of 16.90%.
The FPIs, who are known for their swift risk-on and risk-off strategies now see little incentive to heavily invest in India when other countries offer sharper, faster, and more compelling returns.
“They (FPIs) consistently withdrew money from India and deployed it in markets like South Korea, Mexico, Japan and Hong Kong where the year-long returns were dramatically higher. Even China, which typically lags, outpaced India,” the newspaper quoted the CEO of a global investment firm.
Experts say that a majority of the emerging markets (EM) funds in India is underweight, and foreigners have diverted huge funds from India to other countries in recent times.
'Foreigners removed around $11 billion of Indian equity holdings in 2024'
In an interview with Business Standard, Praveen Jagwani, the chief executive officer of UTI International said that by mid-2025, over 70% of EM funds are underweight in India, which is around 3% below the MSCI EM (Emerging Markets) Index on average.
“Three factors explain this: India’s relative underperformance, steep foreign outflows, and rotation to North Asia. The MSCI India Index has lagged broader EM Index by 25% since 2011. High valuations amplified the underperformance as the index peers saw their weightings surge,” Jagwani told Business Standard.
He added that last year, foreigners removed around $11 billion of Indian equity holdings in their bid to reposition away from India towards North Asia.
“Investors have redirected capital to Taiwan, South Korea, and China to chase heat in US tech and AI catching up with North Asia’s cleaner valuation and more appealing fundamentals. South Korea, China, Saudi Arabia, the United Arab Emirates (UAE), and Brazil are leading inflows in 2025,” Jagwani added.
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