Expert Analysis: India's Strong Fundamentals Amid FII Capital Flight
FII exodus a 'fear psychosis', India's fundamentals strong: Expert

Image: Asianet Newsable
Foreign Institutional Investors (FIIs) withdrew a record ₹2.2 lakh crore from Indian equities in 2026 due to global crises. Debopam Chaudhuri, Chief Economist at Piramal Group, calls this a 'temporary fear psychosis' and expresses optimism for India's economy, which is projected to grow over 6.5%.
- 01FIIs pulled out ₹2.2 lakh crore from Indian equities, a record high for 2026.
- 02Debopam Chaudhuri believes the capital flight is a temporary response to global crises, not a long-term trend.
- 03The Reserve Bank of India's (RBI) record dividend of ₹2.87 trillion will help manage fiscal deficits.
- 04The Indian rupee is currently undervalued due to geopolitical tensions and trade tariffs.
- 05Radhika Rao from DBS Bank notes that India's bond yields are influenced by ongoing geopolitical uncertainties.
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In 2026, Foreign Institutional Investors (FIIs) withdrew a historic ₹2.2 lakh crore from Indian equities, driven by global crises, including the conflict in West Asia. Debopam Chaudhuri, Chief Economist at Piramal Group, described this trend as a 'temporary fear psychosis' typical of emerging markets during such turmoil. He remains optimistic about India's long-term economic prospects, anticipating growth exceeding 6.5%. Chaudhuri highlighted the significance of the Reserve Bank of India's (RBI) record dividend of ₹2.87 trillion, which will assist in managing expected fiscal deficits. The rupee's depreciation against the US dollar is attributed to external shocks, with Chaudhuri suggesting it is currently undervalued. Radhika Rao, Senior Economist at DBS Bank, emphasized that geopolitical uncertainties are affecting India's bond yields and overall fiscal expectations. Despite recent corrections in equity markets, Rao noted that elevated valuations remain challenging in the current environment, but she expects the markets to stabilize as external shocks diminish.
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The capital outflow may lead to increased volatility in the equity markets and affect investor sentiment.
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