Indian Stocks Face Longest Losing Streak in Over Two Decades Amid Foreign Investor Exodus

Indian stocks are experiencing their longest monthly losing streak in over 23 years, marked by significant foreign investor pullbacks. This downturn follows a period of strong performance, with factors such as faltering corporate earnings, economic uncertainties, and a shift in investor focus towards China contributing to the market's decline.

Indian Stock Market Faces Prolonged Downturn

Indian equities are currently in their longest monthly losing streak in over two decades. Both the Nifty 50 and Sensex indices have seen substantial declines, falling approximately 12.6% and 11.7% respectively from their September 2024 record highs. This downturn has erased gains made after the June elections, which had initially sparked a rally.

• Weak corporate earnings, foreign investor outflows, and economic uncertainty are key contributors to the market's poor performance.

Factors Contributing to the Decline

The slide began in October 2024, coinciding with the release of quarterly earnings reports. Approximately 60% of Nifty 50 companies either met or missed market estimates, marking their worst performance since March 2020. This was exacerbated by reduced government spending post-elections, unusual rainfall, and rising inflation. The market's woes continued into the October-December quarter, further impacted by a strengthening U.S. dollar and concerns over potential U.S. tariffs following the presidential election.

Foreign Investors Flee Indian Equities

Foreign portfolio investors (FPIs) have significantly withdrawn funds from Indian equities. In January 2025 alone, FPIs pulled out an estimated $8.3 billion, making it the second-highest monthly outflow on record, surpassed only by the $11.18 billion outflow in October 2024. This exodus is driven by:

• A stronger U.S. dollar
• Elevated U.S. yields
• Tariff concerns
• Sluggish domestic economic growth
• High stock valuations

Shift Towards China

Global investors are increasingly shifting their focus from India to China. Foreigners have withdrawn nearly $29 billion from Indian stocks since October 2024, a record for any six-month period. This capital has largely flowed into China, where the Hang Seng Index has seen a 36% increase since late September, partly due to renewed interest in artificial intelligence and attractive valuations. While India's market was once

Sources

• Foreign investors jilt India as growth falters and China beckons, Reuters.
• India's Nifty, Sensex outperform most global markets, behind only Wall Street, Reuters.
• Investors dig into India's stock market as China flounders, discount risks, Reuters.
• Indian stocks set for longest monthly losing streak in over 23 years, Reuters.