finance
Foreign Investors Sell $21 Billion in Indian Stocks in Past Two Months Amid Global AI Shift
Outflows have put 2026 on track to be the worst year for foreign investment exits from India since markets opened to overseas capital in 1993. Investors have shifted toward South Korea and Taiwan amid booming AI chip demand while India grapples with ripple effects from the Iran war, a weakened rupee, and government calls to curb travel and gold purchases.
May 12, 6:23 PM·2m read1 source
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Foreign investors have pulled $21 billion out of Indian stocks in the last two months, putting 2026 on track to be the worst year for outflows since the markets opened to overseas investment in 1993. The sustained exits mark a sharp reversal from earlier optimism about India's growth story.
Investors are instead looking to South Korea and Taiwan, where stocks are booming on the back of AI chip demand.
Semafor reported that India has been hit especially hard by the ripple effects of the Iran war. New Delhi recently urged Indians to travel less and stop buying gold as authorities sought to stem pressure on the country's external accounts. The rupee has weakened considerably in response to the combined forces of outflows and regional instability.
Adding to the markets’ pain, the digital arm of Reliance Industries is now rethinking its IPO. The offering was originally set to let existing investors cash out. It will instead be a fresh share sale to avoid worsening outflows, according to Semafor.
The change in IPO structure reflects broader caution across Indian corporate boardrooms as foreign portfolio investors continue their retreat. The $21 billion withdrawal over just two months already signals a pace that would eclipse any full-year record since overseas investment was first permitted.
Indian stock markets opened to overseas investment in 1993, a liberalization that helped transform the country's capital markets into one of Asia's deepest.
