Indian Markets Grapple with Volatility and FPI Withdrawals
Indian stock markets are predicted to experience continued volatility in the near term, influenced by global uncertainties and a heavy flow of economic and earnings data, according to market analysts. On Friday, both benchmark indices, Sensex and Nifty, declined by over 0.80%, concluding their second consecutive week in the red. This downturn was largely attributed to persistent foreign fund outflows, mixed corporate earnings, and cautious global cues.
Adding to the market pressure, Foreign Portfolio Investors (FPIs) have resumed selling in November, pulling out a net ₹12,569 crore from Indian equities so far this month. This follows a brief positive inflow in October and several months of significant outflows earlier in the year, with total withdrawals exceeding ₹1.5 trillion in 2025. Experts suggest that global headwinds might keep foreign investors wary of riskier assets.
Electronics Industry Fears Loss of Export Edge
The Indian electronics industry has expressed significant concern to the government, urging a continuation of supportive policy measures. The industry fears losing its export competitiveness due to the easing of US-China trade relations and a halving of tariffs on Chinese goods. The India Cellular and Electronics Association (ICEA) highlighted that this reduction in tariffs has narrowed India’s relative cost advantage by 10 percentage points, potentially impacting export competitiveness, investment attractiveness, and production momentum under the Production Linked Incentive (PLI) scheme.
India's Economic Growth Story Continues to Attract Attention
Despite the short-term market fluctuations, India's long-term economic narrative remains robust. Nilesh Shah, MD of Kotak Mahindra Asset Management Company, highlighted India’s remarkable journey from the 10th to the 4th largest economy in a decade, driven by strong domestic consumption, a vibrant services sector, and manufacturing expansion, which collectively pushed the nation past the $4 trillion GDP mark by 2025.
Global investment bank Goldman Sachs has turned bullish on India, upgrading its rating on Indian equities to "Overweight" and setting a Nifty target of 29,000 by the end of 2026. This positive outlook is based on expectations of a revival in India's growth momentum, supported by favorable monetary and fiscal policies, an earnings rebound, and renewed foreign investor interest.
Key Policy and Development Updates
- The Confederation of Indian Industry (CII) has proposed the establishment of an India Development and Strategic Fund (IDSF). This sovereign-backed, professionally managed institution aims to finance the country's long-term growth, build economic resilience, and secure strategic interests, including acquiring overseas assets in critical sectors like energy and technology.
- The Reserve Bank of India (RBI) has advised state governments to reschedule their market borrowings to alleviate supply pressure in the bond market amidst rising yields, suggesting deferring debt issuance to periods of softer yields.
- The government has permitted 1.5 million tonnes of sugar exports for the 2025-26 season and removed the 50% export duty on molasses, a move aimed at supporting sugarcane farmers.
- In significant investment news, Google’s planned AI hub investment is expected to put Vizag on the global map. Additionally, the MMRDA plans a ₹1.05 trillion integrated tunnel road network across Mumbai.