FM Sitharaman flags global capital moving towards US, AI-linked markets as a ‘concern’ for India in 2027
Finance Minister Nirmala Sitharaman has flagged continued capital outflows as a key concern for India in 2027, with global investments shifting towards the United States and artificial intelligence-linked markets.
This has put pressure on Indian equities, with the benchmark BSE Sensex and Nifty 50 falling nearly 12% over the past year, despite resilient economic growth amid trade uncertainty and geopolitical disruptions.
“The flight of capital toward AI and the US, which otherwise moves toward different countries for different sectoral investments, is a concern,” Sitharaman told CNBC on the sidelines of the IMF-World Bank meetings on Friday.
Foreign portfolio investors (FPIs) have withdrawn ₹52,100 crore from Indian equities in October so far, as elevated crude oil prices, higher US bond yields and a stronger dollar weighed on investor sentiment.
The latest outflow follows a net withdrawal of ₹35,861 crore in September. FPIs had invested ₹20,200 crore in Indian equities in July and ₹29,631 crore in August, according to data from the Central Depository Services Ltd (CDSL).
With the latest withdrawal, cumulative FPI outflows from Indian equities have reached ₹3.12 lakh crore in 2026, nearly double the ₹1.66 lakh crore withdrawn during the whole of 2025, the data showed.
India has struggled to attract investment flows on a scale comparable to those going into AI-linked markets such as Taiwan and South Korea, which have benefited from their exposure to major technology companies.
Taiwan accounts for 29% of the MSCI Asia Pacific ex-Japan index, while South Korea has a 22% weighting, according to a Goldman Sachs report dated October 8. India's share has declined to 10% from 19% a few years ago, according to the news report by CNBC.
The AI investment boom happened as major technology companies and data centre operators pour hundreds of billions of dollars into AI infrastructure, including semiconductors, data centres and cloud computing.
In the United States, companies such as Nvidia, Meta and Oracle have been closely linked to this spending surge, while Asian chipmakers such as Taiwan Semiconductor Manufacturing Company (TSMC), Samsung Electronics and SK Hynix have also benefited from rising demand for AI chips.
This trend made the stock indices of certain countries, such as South Korea and Taiwan, more popular among investors who want to cash in from the AI investment boom.
However, both Taiwan and South Korea's indices are heavily concentrated in a handful of companies. In South Korea, Samsung Electronics and SK Hynix have been key drivers of the KOSPI's rally, leaving the index vulnerable to sharp swings when chip stocks sell off. The index fell from 8,476 points on June 30 to 5,593 points by July 31, a decline of about 34%, showing the risks of such concentration.
Taiwan also faces a similar concentration risk, with TSMC accounting for more than half of the MSCI Taiwan Index.
Despite concerns over the global investment environment, Sitharaman said India would not be hurt by spillovers if the global AI rally collapsed. India has not received the scale of AI investments flowing into other markets, she said.
As per the news report, Sitharaman maintained that the fundamentals of the Indian economy remained sound, even as foreign investor selling and the redirection of global capital pose challenges for domestic markets.
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