Foreign investors see India equities as oversold amid shifting capital flows

Motilal Oswal Financial Services chairman Raamdeo Agrawal told ANI that foreign portfolio investors have withdrawn substantial capital from India over the past two years, but recent activity suggests a possible oversold condition in equities. He linked the prolonged outflows to high domestic valuations, more attractive returns in other markets and the absence of a compelling AI investment theme. Despite this softening, Agrawal highlighted robust domestic fundamentals, including strong automobile sales, healthy GST collections and credit growth near 18 percent.

He warned that ongoing geopolitical tensions and high oil prices continue to pressure India’s external position, though he expects the Reserve Bank of India to mirror the US Federal Reserve’s current rate-pause stance. Agrawal cautioned that the surge in credit growth could create short-term inflationary pressure. Regarding bond markets, he said Bloomberg’s delay in adding Indian government securities to its Global Aggregate Index reflects a cautious, tactical approach by benchmark providers, not a fundamental flaw in India’s debt outlook. Ashish Shanker, MD & CEO of Motilal Oswal Private Wealth, echoed the view that global liquidity conditions and emerging-market sentiment shape bond allocations, but sees India’s debt market as well-positioned for future foreign inflows.