Foreign investors are pulling money out of India’s equity market, cutting their exposure as the US interest rate cycle turns and millions of domestic savers continue to pile into richly valued stocks. Foreign institutional investors have turned net sellers of India-listed shares in August, with net outflows of more than $1bn, according to data from Bloomberg and the Securities and Exchange Board of India. Year-to-date inflows stood at $2.6bn, well below the $22bn recorded last year.
But global investors are warning over its lofty valuations as retail investors have piled into the market. “This cycle is locals rather than foreigners — the previous cycles were always the other way around,” said Aashish Agarwal, India country head at investment bank Jefferies. Sat Duhra, a portfolio manager at asset manager Janus Henderson, said domestic investors had been shifting bank deposits into the market, particularly through mutual funds.