New Delhi: Domestic mutual fund inflows have shielded Indian equities from a decline of 20-30 per cent this year, amidst persistent selling by foreign portfolio investors (FPI), Jefferies’ global head of equity strategy, Christopher Wood, said
Wood said that Indian shares have shown relative underperformance compared to Asian peers due to premium valuations. In an interview with CNBC TV18, he described the ongoing trend in the Indian market as a “healthy consolidation”, which may continue until 2025.
August marked the 25th consecutive month of net inflows from domestic investors, with $37.6 billion invested in equities in the first five months of FY26, contrasted with $1.5 billion worth of outflow in net selling by foreign institutional investors.
Wood added that any resolution of US tariffs on India could trigger a market rally, but a more critical factor would be any signs of a pick-up in India’s nominal GDP next year.
The measures around rate cut, GST reforms, and the income tax cuts announced in the Union Budget could act as catalysts of economic activity and a subsequent market rally next year, said Wood.
Foreign institutional investors (FIIs) have sold over Rs 1 lakh crore in Indian stocks since July, impacting the market sentiments, but consistent domestic inflows lent support, according to provisional data from stock exchanges.
The sell-off, driven by lacklustre earnings, stretched valuations, and uncertainty over US tariffs, has resulted in range-bound indices. Between July 1 and September 8, foreign institutional investors sold equities totalling Rs 1.02 lakh crore, with Rs 7,800 crore sold in the first six sessions of September.
India’s GDP growth has rebounded strongly in Q1, and the reforms such as budget tax cuts, rate cuts by the MPC and GST rationalisation have the potential to sustain the growth momentum.
Analysts feel that there is a high likelihood of above 15 per cent growth in corporate earnings in FY27, leading to a turnaround in FPI sentiments.