Nirmala Sitharaman Warns of Capital Outflows Risk for 2027

Finance Minister Nirmala Sitharaman attributed the underperformance of India's equity markets to excess liquidity and the ease with which investors can exit positions to convert them into cash. Speaking at the IMF-World Bank meetings in Bangkok, she identified sustained capital outflows as a primary risk for India heading into 2027.

Foreign portfolio investors have sold over $33 billion in direct Indian equities this year, contributing to a nearly 12 percent decline in domestic equity benchmarks. This volatility is further evidenced by total equity outflows for 2026 exceeding ₹2.2 lakh crore, with some months seeing pulls of over ₹27,048 crore. Consequently, India's share of the MSCI Asia Pacific ex-Japan index has dropped from 19% to 10%.

Sitharaman noted a global shift of capital toward the United States and artificial intelligence investments, which has benefited markets in Taiwan and South Korea. However, she maintained that India's economic fundamentals remain sound. She argued that the country's limited exposure to the AI investment boom protects it from significant harm should a global AI investment bubble burst.