FPI equity withdrawals cyclical, money may return as AI boom peaks
NSE MD Ashish Chauhan says FPI equity withdrawals are part of a cycle and capital may return to India once the global AI boom peaks.
FPI equity withdrawals from the Indian market are a natural part of a global investment cycle, according to NSE Managing Director and CEO Ashish Chauhan. He suggested that as the current artificial intelligence-driven rally in US and Asian markets reaches its peak, foreign capital may eventually flow back into Indian equities.
The AI-Driven Capital Shift
Chauhan noted that the massive surge in the American market—which has seen a valuation leap from $25 trillion to approximately $75 trillion—is being fueled by the AI narrative. Similar trends are being observed in markets like South Korea and Taiwan, which are attracting significant global interest.
“FPIs are fund managers who take out their money and go there for a cycle, and they do this often. Since they are foreigners, they can take out their money and cycle it,” Chauhan explained. He further shared his personal perspective that once this specific AI-led cycle concludes, the capital may find its way back to India.
Understanding Recent Market Volatility
The comments come at a time when the Indian equity market is witnessing a shift in foreign investment patterns. After a period of strong buying, the market has seen a reversal in September. Key data points include:
- July and August: FPIs were net buyers, investing approximately Rs 11,045 crore in July and Rs 10,231 crore in August.
- September Trends: Data from NSDL shows that FPIs withdrew Rs 23,676 crore through September 19.
- Daily Fluctuations: On September 25, NSDL data indicated FPIs were net sellers of Rs 4,521.96 crore in equities.
Global Factors Driving Outflows
The recent reversal in capital flow is not happening in isolation. According to the Reserve Bank of India's (RBI) September Bulletin, several macroeconomic factors are contributing to the current uncertainty, including:
- Rising global bond yields.
- Increased tensions in West Asia.
- Elevated crude oil prices.
- Currency pressures.
While the equity segment saw inflows in August, the total FPI flows turned negative in September through September 21. For the period of 2026-27 up to September 21, FPIs recorded net outflows of USD 4.9 billion, primarily driven by these withdrawals from the equity segment.