Domestic valuation, AI, geopolitics reasons for FPIs pulling out, says Motilal Oswal Financial Services' Raamdeo Agrawal

Raamdeo Agrawal of Motilal Oswal Financial Services has highlighted several key factors contributing to the withdrawal of foreign portfolio investors (FPIs) from the Indian equity market over the past two years. According to Agrawal, domestic valuation issues have played a significant role, as inflated valuations have made Indian equities less attractive compared to other emerging markets. This trend has prompted FPIs to seek more lucrative opportunities elsewhere, leading to a noticeable decline in their participation. Additionally, the rapid advancements in artificial intelligence (AI) have influenced investor sentiment. The growing focus on AI-driven innovations has shifted global investment patterns, as investors are now prioritizing markets with robust technology sectors and AI capabilities. India's slower pace of AI integration compared to some other regions has further exacerbated the outflow of FPIs, as they gravitate towards markets that are better positioned to capitalize on the AI revolution. Geopolitical tensions have also contributed to the exodus of FPIs. Ongoing uncertainties in global trade and regional conflicts have made investors more cautious, prompting a reassessment of risk and return profiles across different markets. Agrawal notes that these geopolitical dynamics have amplified the challenges faced by the Indian market in retaining foreign investment. As a result, understanding and addressing these multifaceted issues will be crucial for India to regain its appeal among international investors.

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