Global funds retreat from Indian stocks as some cut exposure to zero - Bloomberg

Investing.com -- Global investors are pulling back from Indian equities, with some money managers cutting their allocations to zero as weak earnings, elevated valuations, and the lack of a major artificial-intelligence investment theme reduce the market’s appeal, Bloomberg reported on Saturday.

Foreign portfolio ownership of companies listed on India’s National Stock Exchange has fallen to a 17-year low. Overseas funds have withdrawn a net $25 billion from Indian stocks this year, shifting capital toward markets such as Taiwan and South Korea that offer greater exposure to the AI investment boom.

Reed Capital Partners exited its Indian equity portfolio about a month ago, and money managers at Janus Henderson Investors and Vantage Point Asset Management have also reduced India exposure to zero over roughly the past year.

Indian stocks remain expensive relative to emerging-market peers. The Nifty 50 trades at about 17.6 times forward earnings and commands a 77% valuation premium to the MSCI Emerging Markets Index.

The Nifty is trading near levels last seen in mid-2024 and is on course to end a decade-long run of annual gains. India’s weighting in the MSCI Emerging Markets Index has dropped to about 11% from 16% a year earlier.

Higher oil prices and a weaker rupee have added to investor concerns. India’s reliance on imported energy has increased pressure on its current account during the U.S.-Iran war, with the rupee falling to a record low and ranking among Asia’s weakest currencies this year.

Domestic investors have helped offset foreign selling, purchasing a net $60 billion of stocks this year, according to BSE data.

Some investors remain bullish. Morgan Stanley expects India to benefit from a multi-quarter economic growth upcycle and sees the BSE Sensex rising 19% to 89,000 by June 2027 under its base case. Its bull-case target is 100,000.

Foreign investors, though, are increasingly directing capital toward technology-heavy North Asian markets, leaving India fa