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FIIs diverted funds from India to China in late 2024 and early 2025 as China's market bottomed out
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Nearly Rs 98,000 crore has been withdrawn by foreign investors from Indian debt and equity markets in 2025
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Asian markets like South Korea and Taiwan attracted funds due to better economic prospects and US trade deals
Attractive Asian markets like South Korea, Taiwan, and China lured foreign capital away from India this year, Jefferies' top strategist Christopher Wood said. Turbulence caused by US tariffs on Indian goods has not been the primary motivator of the pullout.
"Foreign investors diverted funds from India to China in the last quarter of calendar year 2024 and the first quarter of 2025 as the market there bottomed out. Recently, FIIs have been selling India to fund positions in Korea and Taiwan," Wood, global head of equity strategy at Jefferies, told NDTV Profit.
Foreign investors have moved nearly Rs 98,000 crore or $11.2 billion out of Indian debt and equity markets so far in 2025, as per NSDL data. From stocks, they have taken out Rs 1.4 lakh crore.
On the other hand, Asian peers have run up on hopes of better economic prospects after several export economies struck trade deals with the US to limit high tariffs.
Chris Wood, who has long been an India bull, expects a trade deal between New Delhi and Washington could be 50% complete in the coming weeks or months. Even as India may potentially reduce its oil purchases from Russia, US pressure in itself won't seal the deal, he said.
"Indian markets are trading sideways due to mutual fund inflows. The domestic influence is absorbing negative market sentiment. 2025 is a year of healthy consolidation for Indian markets," Wood said.
The Jefferies strategist noted that corporate India's earnings growth have slowed corresponding to a slowdown in India's nominal GDP. High relative valuations have added to subdued sentiment.
He also said that Indian government bonds are more attractive at current levels and dismissed worries over fiscal pressures after broad income and GST tax cuts. The rupee may also bottom out at 89 against the dollar, according to Chris Wood.
"The Indian government has done everything possible to promote growth. The Reserve Bank of India should not cut interest rates any further," he said.
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