“Since FPIs are underweight, will they campaign to unnerve DIIs? (Everything is fair in love, war and the money-making business),” he wrote. “Will the DIIs campaign to unnerve FPIs? … Will retail investors withstand higher volatility and negative returns in the short term and moderate returns in the long term?”
Shah said there are “many questions but very few answers.” What matters most, he argued, is that Indian companies continue to deliver double-digit earnings growth and return on equity, underpinned by the “2 Gs of Growth and Governance.” He noted that the “third G of Green is on the back foot.”
FPI share at 13-year low
Shah’s comments come as foreign portfolio investors (FPIs) cut their holdings in Indian stocks to a 13-year low in August. Data from the National Securities Depository Ltd show their share in NSE-listed companies dropped to 15.85%, with portfolio value falling to Rs 70.33 lakh crore from Rs 71.97 lakh crore in July, a 2.3% decline.
Overseas investors pulled out Rs 34,993 crore from equities in August, the sharpest monthly outflow this year, pushing year-to-date withdrawals past Rs 1.3 lakh crore. Since January, FPIs have pared nearly Rs 1.7 lakh crore from Indian markets.
India slips in EM rankings
Nomura said 71% of emerging-market funds were underweight India at the end of July, up from 60% earlier, making the country the largest underweight market in EM portfolios.
BofA Securities said India has fallen to “the bottom of emerging market preferences” following U.S. tariff shocks, even as North Asian markets benefit from the AI cycle.
Domestic resilience
Despite foreign selling, India’s benchmark indices have advanced nearly 4% in 2025, buoyed by domestic inflows. Jefferies said FPI allocations are at “decadal lows” but pointed to strong local flows as “big downside protection and a sentiments booster.”
India’s economy has also surprised on the upside, with GDP growth accelerating to 7.8% in the June quarter, compared with consensus expectations of 6.7%. Growth was led by manufacturing and financial services, according to BofA Securities.
GST overhaul in focus
Shah welcomed the government’s move toward GST slab rationalisation and rate reduction, calling it “a step in the right direction.”
Brokerages, including Emkay Global, have described GST reform as a “growth-accretive, big-ticket” measure that could help offset weak earnings and draw foreign investors back.
Also read | Profit-taking in consumption sectors won’t end GST rally: Analysts
“As Mr. Buffett said, stocks are slaves of earnings,” Shah said, adding that what looks expensive on a one-year basis could appear cheap over five years.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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