Amid relentless selling by foreign portfolio investors (FPIs), driven by rising tensions in the Middle East, elevated valuations, and recent tax changes, investors have been hitting the sell button aggressively in the Indian stock market, causing local equities to bleed heavily.
Against this backdrop, Zerodha co-founder , in a post on X, flagged multiple structural concerns that could be dampening foreign investor interest in India.
Kamath, citing feedback from an industry participant, said investor interest in India has “pretty much died out,” pointing to geopolitical risks, rich valuations, lack of meaningful AI opportunities, and tax concerns.
He further said, citing the same feedback, that India is seen as geopolitically exposed, particularly to potential oil shocks, while also lacking meaningful AI plays, with rich valuations and currency concerns weighing on sentiment.
He also shared that investors who were sitting on gains have taken money off the table and are now looking at markets such as Japan, Taiwan, Korea, and Europe instead.
Referring to the same feedback, Kamath said the current LTCG/STCG structure, along with the increase in(STT), has made India less attractive compared to other markets that are witnessing inflows.
He added, based on the feedback, that if India wants to attract back — which it needs to — addressing these issues could be relatively low-hanging fruit.
FPI selling in 2026 surpasses total 2025 outflows
After withdrawing more than ₹1 lakh crore in March, overseas investors have extended their selling spree into early April, as tensions in West Asia continue to simmer, keeping risk aversion intact. Higher yields have improved the relative attractiveness of dollar-denominated assets, prompting capital to move away from emerging markets such as India.
In the first seven trading sessions of April, worth of Indian stocks, extending their selling streak to the 23rd straight session and taking the combined outflows to ₹1.37 lakh crore, according to NSDL data.
In FY26 so far, they have withdrawn ₹1.77 lakh crore, crossing the total outflows of ₹1.66 lakh crore in 2025. In March alone, they withdrew ₹1.17 lakh crore, marking the highest monthly FPI selling on record, implying an average daily outflow of around ₹6,198 crore.
The Indian stock market began 2026 amid a fresh wave of optimism after underperforming most of its Asian peers in 2025. However, unexpected tensions in West Asia have created energy disruptions, clouding the near-term outlook, with analysts not ruling out a resumption of earnings cuts if the situation does not improve.
In terms of earnings, domestic brokerage firm Motilal Oswal said the current will reflect the impact of the Strait of Hormuz crisis, expecting Nifty 50 earnings to grow 6% year-on-year in Q4 FY26.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.