Why Are FPIs Walking Away From Indian Markets Despite Its Growth Story?

By Govindraj Ethiraj

An Indian-origin emerging markets fund manager once told me how, in the early 1990s, Brazilian inflation topped 2,000%, yet residents of Rio de Janeiro danced the samba on the beaches. 

Despite flailing macroeconomic indicators, the country's stock market powered ahead, crowning Brazil as Latin America’s best-performing market in 1993. 

When I asked him about India's prospects in the late 1990s, his answer was straightforward: Markets always look ahead, so look ahead and not back.

That axiom has stayed with me, especially now, as India is experiencing the exact reverse.

On paper, the country's macroeconomic data remains stable. 

Yet, Indian equities are taking a pounding as foreign portfolio investors (FPIs) rush for the exits. 

IPO’s Are Making It Worse

In September, FPIs dumped $2.1 billion in local equities, abruptly halting two months of net buying. 

The flight extends to debt. Outflows from index-eligible sovereign bonds reached $1.1 billion this month, according to a Bloomberg report. 

That would mark the worst bleed since March and a sharp reversal from June’s record inflows.

A relentless flood of initial public offerings is making the liquidity squeeze worse.

Indian companies raised a record Rs 2.43 trillion ($25.27 billion) in the first half of fiscal 2027, according to PRIME Database Group. 

Equity fundraising jumped 75% year over year between April and September, helped by average listing gains that have risen from 7% to 19%.

Oil Is Still The Big Variable

Then there is oil.

The outlook is hazy. Flows through the Strait of Hormuz may have recovered to near pre-war levels going by some reports, but crude stubbornly remains around $102 a barrel.

Indian policymakers are now openly acknowledging the severe downstream reality of the war against Iran. 

Last week, External Affairs Minister S Jaishankar warned of a looming "major food crisis," compounding the fertiliser shortages already stemming from the conflicts in Ukraine and Iran. 

He rightly noted the situation is highly stressful for the Global South—economic havoc the US administration appears to have neither anticipated nor particularly cared about when hostilities commenced.

Economy No Longer The Signal

Domestic policymakers, meanwhile, are taking comfort in the resilience of the financial system and strong corporate balance sheets.

Whether those defences hold will become clearer as second- and third-quarter earnings arrive.

But the more interesting question is what, exactly, would persuade foreign investors to return. Since it is their return that will lift markets to a fair extent.

A recent report from the brokerage Bernstein offers a fascinating thesis on how foreign institutional investors actually think, asking whether they follow the broader economy or simply earnings. 

Historically, up until 2007, FII flows and India's GDP growth moved in tight tandem. 

Over time, that relationship has fractured. Today, the correlation between India's macroeconomy and foreign flows appears to be outright negative.

We are left with a profoundly counterintuitive reality. 

If markets truly look ahead, and foreign capital now views peak macroeconomic performance as a signal to sell, a sustained market recovery in India might well depend on the arrival of weaker economic data.

Don’t Miss a Beat: The Hidden Risks to Indians

For people making high-stakes decisions every day, stress can become routine. Long hours, poor sleep and constant pressure are often treated as part of the job. But cardiovascular risk can build quietly. High blood pressure, cholesterol, diabetes and genetic risk may show few obvious signs, even in people who feel healthy and perform at a high level.

On 6 October, The Core, in partnership with EDGE Community, is bringing together leading cardiologists for a closed-door breakfast conversation hosted by The Quorum Club Mumbai, moderated by Govindraj Ethiraj.

The discussion will focus on what high-performing professionals should know about prevention, screening and the risks that are easy to overlook. If you manage risk for a living, your heart should be part of that equation too.

By invitation only| 6 October 2026 | 8:30 AM onwards | Mumbai

Blu Dot surpasses 2,000% ROAS with self-serve CTV ads

Home furniture brand Blu Dot blew up on CTV with help from Roku Ads Manager. Here’s how:

After a test campaign reached 211,000 households and achieved 1,010% ROAS, the brand went all in to promote its annual sales event. It removed age and income constraints to expand reach and shifted budget to custom audiences and retargeting, where intent was strongest.

The results speak for themselves. As Blu Dot increased their investment by 10x, ROAS jumped to 2,308% and more page-view conversions surpassed 50,000.

“For CTV campaigns, Roku has been a top performer,” said Claire Folkestad, Paid Media Strategist, Blu Dot. “Comping to our other platforms, we have seen really strong ROAS… and highly efficient CPMs, lower than any other CTV partner we've worked with.”

Using Roku Ads Manager, the campaign moved from a pilot to a permanent performance engine for the brand.

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Rs 508.66 crore

That’s how much the Centre has approved for strengthening and selectively widening two national highways in West Bengal’s Birbhum district, Minister for Road Transport and Highways Nitin Gadkari said in a post on X.

Impact: The project is supposed to cover 91.9 km of NH-14, from Bhimgarh to Nalhati via Mallarpur, and 56.4 km of NH-114, from Surul village to Mallarpur.

Gadkari said that “the upgraded corridors will improve road safety, ease congestion, reduce travel time, facilitate smoother movement of people and goods, and strengthen connectivity between villages, towns and key economic centres.”

The announcement comes as India’s broader highway-awarding activity has slowed. The government awarded around 12,000 km of highways annually in the three years to FY23. That fell to roughly 7,000-8,000 km a year in the following three years, as The Core recently covered.

Why It Matters: The slowdown reflects a shift in how the government awards projects, rather than necessarily less spending on roads.

It is increasingly prioritising projects after substantial land acquisition and key approvals are in place, to reduce construction delays.

The government said 524 highway projects sanctioned or awarded over the past five financial years had missed their original completion schedules, citing land acquisition, statutory clearances, utility shifting, encroachments and contractor performance among the reasons.

OPEC Holds Output

OPEC+, an alliance of the Organisation of the Petroleum Exporting Countries (OPEC) and oil-producing allies including Russia, is set to keep its November oil production targets unchanged as the war in West Asia disrupts crude supplies and shipping, sources told Reuters. 

Catch Up Quick: OPEC itself comprises 12 oil-producing countries: Saudi Arabia, Iran, Iraq, Kuwait, the UAE, Venezuela, Nigeria, Libya, Algeria, Congo, Equatorial Guinea and Gabon. OPEC+ adds major non-OPEC producers including Russia, Kazakhstan and Oman. The group has raised its targets this year while unwinding earlier production cuts, but producers still struggle to get more crude onto global markets.

Core OPEC+ members pumped around 25 million barrels per day in August, about 5 million bpd below their pre-war February level. The conflict has also reduced OPEC+’s ability to deploy spare capacity and quickly calm oil markets. 

Pivot: Meanwhile, disruptions in the Strait of Hormuz have constrained Gulf exports, while lower Russian shipments and strong Chinese demand are tightening alternative supplies. For India, which imports most of its crude, prolonged supply disruptions could push up oil costs, weaken the rupee and add to inflationary pressure.

Automakers Stock Up

India’s automakers are ramping up production and building dealer inventories as they prepare for strong vehicle demand during the festive season, industry leaders told PTI.

Origin: Maruti Suzuki has 2.2 lakh pending bookings, equivalent to 16 days of stock, and has commissioned two new production lines that will add 5 lakh vehicles to its annual capacity. Hyundai Motor India has built four to five weeks of inventory across its dealer network to ensure faster deliveries. Mahindra & Mahindra has increased its SUV and electric vehicle manufacturing capacity to 68,000 units a month, helping reduce waiting periods.

Context: Automakers are trying to convert strong bookings into retail sales during Navratri, Dussehra, Dhanteras and Diwali. By increasing production and dealer stocks, they want to ensure customers can get their vehicles during the crucial festive buying period.

CJP Takes On Election Commission

Protests demanding Chief Election Commissioner Gyanesh Kumar’s resignation intensified across Delhi and Mumbai over the weekend, led by opposition parties and youth-led groups including the Cockroach Janta Party (CJP). Protesters are opposing the Election Commission’s Special Intensive Revision (SIR) of electoral rolls, which they allege has removed millions of eligible voters.

The Election Commission and the ruling BJP have rejected the allegations, saying the exercise aims to remove duplicate, deceased and ineligible voters and protect the integrity of electoral rolls.

The Lead: In Delhi, police detained protesters for a third consecutive day as they tried to gather around Jantar Mantar. Police later released many demonstrators but filed cases against some for allegedly violating orders banning mass gatherings. Meanwhile, opposition parties plan to march to the Election Commission’s office on Monday.

Outcome: CJP has announced a major Delhi rally for October 10 if Kumar does not resign.

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