Sridhar Sivaram Explains Why FIIs Are Shunning India, But Says Earnings Pickup Is In Sight

Foreign institutional investors (FIIs) have largely stayed away from Indian equities this year, despite a strong rally across other emerging markets. Sridhar Sivaram, Investment Director at Enam Holdings, says the combination of high valuations and muted earnings growth has made India less attractive compared to peers.

“If you have 7–8% earnings growth and your market PE is 22, while Brazil, China, Korea, and Taiwan offer far better earnings growth at much cheaper valuations, it’s obvious where the money flows,” Sivaram explained.

He pointed out that Korea is up 60–70%, China 40%, and Latin America 30–40%, while India has remained flat in dollar terms. “It’s a very rare year where the average emerging market is up at least 30–40%, and we are flat. This does not happen often,” he added.

In the first week of December alone, foreign investors continued their sell-off spree, offloading equities worth R 11,820 crore. For 2025, cumulative FII outflows have gone above Rs 1.5 lakh crore, as cautious sentiment and global headwinds keep pressure on domestic market markets

Despite the current underperformance, Sivaram expects a turnaround in corporate earnings over the next six quarters. “We’ve missed earnings growth for six quarters now, but FY27 could see 15–18% growth on a low base,” he said. According to him, earnings remain the single biggest determinant of market performance, and if this revival plays out, investors can expect reasonable returns going forward.

Sivaram further explained that, "one of our house's view was that 2025 will be a tough year and we had multiple global challenges, trump tariff was just one of them, the high valuations, the poor earnings growth and the list goes on... all this is playing out."

However, Sivaram also highlighted his bullish stance on precious metals, noting that he remains long on both gold and silver. He remarked that these assets have delivered strong returns through 2025.