India’s Record Foreign Exodus, and the Case for Patience
Overseas investors have pulled nearly $30 billion from Indian equities this year. UBS sees no hurry to return.
India. For most of the past decade India was the emerging market foreign investors could not afford to be without. In 2026 they are leaving it at a record pace. Foreign portfolio investors have pulled nearly $30 billion from Indian equities so far this year, according to Kotak Neo, already well past 2025’s roughly $18 billion. September brought net selling of ₹35,860 crore, and another ₹9,231.88 crore left on 1 October. That day the Nifty 50 touched 22,301.30 and The Week reported the market on course for an eighth straight weekly loss, the longest run in 25 years.
## Why the money is going
The reasons are mostly external. A US 10-year yield above 5% makes dollar assets competitive. Oil near $100 hurts a country that imports most of its crude. The rupee has fallen nearly 7% against the dollar this year, eroding returns for foreign holders. And capital has rotated toward South Korea and Taiwan, where the AI hardware trade lives.
## The UBS view
UBS strategists Sunil Tirumalai, Karen Hizon and Kruti Shah kept India at underweight in a 2 October note, according to a published summary. They put the market at 28 times forward earnings, still above its 10-year average of 27.3 times even after a 14.7% fall in dollar terms this year, and forecast 2026 earnings growth of 20% against 42.6% for emerging markets overall. India ranks last of 19 markets on the bank’s fundamentals scorecard and has no measurable AI earnings exposure, the note argues.
The case for patience rests on domestic money. Local institutions have absorbed much of the foreign selling, and UBS names domestic retail flows as the main risk to its own call. A cooler oil price or a Fed pause would change the arithmetic quickly.
Sources: Kotak Neo, The Week, Exencial (summary of UBS research). This is information, not investment advice.
