The foreign investments in the Indian markets have slumped to a 10-year-low the aggregate net investments by foreign portfolio investors in local shares stood at Rs 7.3 trillion as of June 1, the lowest level since 2016, data from National Securities Depository Ltd showed.
In the month of May, the Foreign Portfolio Investors (FPIs) sold net equity for Rs 32,963 crores with the sustained selling continued in early June, as the total selling up to June 6 stood at Rs 42,926 crores taking the total selling in 2026, so far, to Rs 283662 crores.
But the question is, how to bring back the foreign investors back?
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said, “If FPIs are to invest in India, the AI trade which has been the principal driver of FPI outflows away from India should change. There are early signs of this happening….”
“The crash in Nasdaq by about 5% on June 5 is an indication that the AI bubble may burst. If the AI trade cools down and reverse that can trigger reversal of FPI outflows. Watch out this trend,” he said.
Considering the significance of FPI inflows to finance the current account deficit and the Balance of Payments gap, the Central Bank and the government initiated several steps to attract FPI, he noted.
“The measures like exemption of interest and capital gains from FPI investment in government securities from taxation announced by the government on 5th June, followed by announcements in the monetary policy like the RBI absorbing the hedging costs on FCNR deposits mobilised by commercial banks, increase in forex swap window, increased access to government bonds through the FAR route, increased limit for NRIs and OCIs to invest in the Indian equity market etc will pave the way for forex inflows into India. This has also helped in the stabilisation of the rupee. The rupee which had depreciated to a low of 96.96 has appreciated to 94.94 on 5th June. This is a positive development.”
Recently, government has introduced a series of reforms to increase Foreign Investors participation in the Government Securities (G-Secs). Key measures include tax exemptions on interest income, long-term capital gains (LTCG) and short-term capital gains (STCG), expansion of specified securities under the Fully Accessible Route (FAR), and streamlined investment norms.
As on 12 May 2026, FPIs held G-Secs worth Rs 3,75,171 crore, accounting for 3.34% of the total outstanding G-Secs stock of Rs 112.42 lakh crore, government data showed.
Notably, in a week time period, the Taiwan and South Korea Stock Markets have surpassed India globally.
The rise of Taiwan market has been fuelled entirely by the artificial intelligence-driven surge in Taiwan Semiconductor Manufacturing Company (TSMC).
‘If AI Trade Cools Down…’: Market Expert On Bringing Back Foreign Investors to India
