Sitharaman says liquidity has made it easy for foreign investors to leave India and that the economy is fine. The flow data supports her, but it also shows Indian savers are paying for that exit.
Finance Minister Nirmala Sitharaman has given the most honest official reading yet of India’s stock market slump. Her point is that foreign investors are not fleeing a weak economy. They are leaving because India’s market is deep enough to let them sell easily.
Speaking on the sidelines of the IMF-World Bank meetings in Bangkok on Friday, she said abundant liquidity had made exits easy and the economy’s fundamentals remained fine. She listed fuel, fertiliser and the flow of capital as India’s biggest risks for 2027. She also called the rush of global money towards AI and the US a concern.
Early reports, including several in India, said she had blamed excess liquidity for the market’s poor performance. CNBC, which carried the interview, later corrected its story to make clear she was talking about how easy it is to exit, not what caused the underperformance.
Selling
The data shows the scale of the shift in who owns Indian stocks. Foreign portfolio investors (FPIs) put a net ₹427 crore into Indian equities in 2024, essentially flat. In 2025 they withdrew ₹1.66 lakh crore. This year they have pulled out about ₹3.1 lakh crore so far, more than $33 billion, nearly double last year’s record.
The selling has picked up recently. FPIs sold ₹35,861 crore in September and another ₹47,417 crore in just the first 12 days of October.
Domestic institutional investors (DIIs), which include mutual funds, insurers, pension funds and banks, have more than made up for it. They bought a net ₹5.26 lakh crore of Indian shares in 2024, ₹7.88 lakh crore in 2025 and ₹6.83 lakh crore so far in 2026.
Over 2025 and 2026, foreign investors have sold about ₹4.8 lakh crore while domestic institutions have bought about ₹14.7 lakh crore. Domestic buyers have put in roughly three rupees for every rupee foreigners took out.
Mutual funds drive much of that. Equity schemes took in a net ₹38,306.55 crore in September, up about 31% from August, and have had positive inflows every month since March 2021.
Ownership changed now
The result is a historic change in who owns Indian companies. DIIs now own about 17% of NSE-listed companies, a record. FPI ownership has fallen to 15.8%, a 15-year low. In the Nifty 500, domestic institutions hold about 21%, well ahead of foreign investors.
Sitharaman is right, but her argument cuts both ways.
A market that absorbs ₹3 lakh crore of foreign selling in a year without collapsing is impressive. It is also what makes India attractive to sell. When global funds need cash to chase AI stocks in the US, Taiwan or Korea, they sell where they can get the best price with the least disruption. India’s steady SIP money makes it the most convenient place to raise that cash.
The flow data also shows a subtler pattern. This year, FPIs have sold about ₹3.64 lakh crore of listed shares, but they have put about ₹56,485 crore into IPOs and other new issues. In effect, foreign investors are selling seasoned Indian stocks and buying new listings at the issuer’s chosen price. Much of that new supply comes from promoters, private equity and multinationals cashing out, the same premium exits the minister mentioned.
Domestic buying has not prevented losses. Even though DIIs have bought more than twice what FPIs sold this year, benchmark indices are still down about 12%. Prices are set by the most motivated seller, and right now that is foreign money. Domestic inflows have stopped a crash, but they have not produced a rally.
That leads to the real risk, which the minister did not spell out. The domestic floor depends on Indian savers continuing to invest through monthly SIPs during a losing year. So far they have done so remarkably steadily. If that patience runs out, the shock absorber weakens just as foreign money is still leaving.
Her AI argument also deserves attention. India missed most of the AI investment boom, so it has little to lose if that bubble bursts. That could make India one of the few large markets with room to benefit when global money eventually rotates away from AI.
Of course, monthly SIP numbers will show whether domestic investors are holding steady. And any sign the global AI trade is cooling could be the first trigger for foreign money to return.
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