New Delhi [India], January 3 (ANI): After a challenging 2025 for overseas investors, foreign portfolio investors (FPIs) are expected to stage a comeback in Indian equities in 2026. Market strategists note that factors driving record outflows last year are easing, while earnings visibility, valuations, and macroeconomic stability are becoming increasingly supportive.
In its report titled “India Equity Strategy 2026”, Antique Stock Broking Limited highlighted that FPIs pulled out about USD 17.5 billion from Indian equities in 2025—the highest annual outflow on record in absolute terms. The report cites weak earnings momentum, global risk aversion, and stronger opportunities in AI-heavy markets as key reasons for the outflows.
The report suggests a potential revival in 2026, noting supportive conditions such as low FPI ownership despite strong earnings growth, reasonable valuations relative to other emerging and developed markets, and low market beta. Mutual fund inflows are also expected to continue, bolstered by steady SIP contributions, EPFO/NPS flows, low domestic equity ownership, and superior equity returns relative to other asset classes.
Corporate earnings in India are expected to accelerate sharply, with Nifty earnings projected to grow at around 16% CAGR over FY26–FY28, compared to roughly 7% over the previous two years. India’s macroeconomic backdrop is also unusually supportive: real GDP growth is forecast at around 7.5%, inflation is expected to remain benign, and the current account deficit is projected below 1% of GDP. A stable currency outlook and easing global monetary conditions reduce the risk of sudden macro shocks that often concern FPIs.
The report also highlighted a potential risk linked to Artificial Intelligence (AI). Global investors are increasingly allocating capital to markets and companies with direct AI exposure, including semiconductors, advanced hardware, cloud infrastructure, and AI-native platforms. While India benefits from strong domestic growth, it remains largely an AI user rather than an AI producer at scale. This mismatch may limit the flow of global capital into India’s technology and export-heavy sectors.
However, the AI-related risk does not affect all sectors equally. Capital-intensive, domestic-cycle sectors such as banking, infrastructure, and consumption may continue to perform well locally, while technology services, traditional exporters, and index-heavy sectors could see relative neglect if they fail to present credible AI monetisation stories, potentially widening sectoral divergence within Indian markets. (ANI)
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