Indian Stock Exodus Balloons to $5 Billion on Downbeat Profits

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Stocks in India look set for further declines as foreign investors resumed selling shares amid persistent worries over company earnings growth and sluggish consumption.

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Bloomberg News

Bloomberg News

Abhishek Vishnoi and Ashutosh Joshi

Published Jan 22, 2025  •  2 minute read

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Stocks in India look set for further declines as foreign investors resumed selling shares amid persistent worries over company earnings growth and sluggish consumption.

Global funds pulled a net $5.4 billion from Indian equities in January, marking the worst start to a year, after a brief reprieve last month. While inflows into mutual funds remain robust, continuous selling by foreigners have neutralized much of that support.

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Worries about India’s growth trajectory are intensifying as the latest data suggests Asia’s third-largest economy is headed for its slowest expansion since the pandemic. The benchmark NSE Nifty 50 Index has fallen almost 12% from its September peak, with weak corporate results so far this season dashing hopes of a near-term revival.

“The exodus of foreign money from India may continue due to an earnings crunch and slowdown in parts of consumption,” said Nitin Chanduka, a strategist at Bloomberg Intelligence in Singapore. Foreign investors have mainly sold financials, energy and sectors vulnerable to slowing growth, he said.

Global funds have withdrawn over $17 billion from the South Asian nation’s equities since October, when the foreign exodus began. 

About a fortnight into the December-ending quarter’s results season, only three of the 11 NSE Nifty 50 Index members that have reported so far have beaten estimates. 

“Almost all sectors have seen lower earnings, and the signs for third quarter so far are not very promising,” said Kunal Vora, head of India equity research at BNP Paribas. The consensus expectation of 14%-15% earnings growth for Nifty members next fiscal year are built on “high level of optimism,” he said.

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Urban Demand

Investor focus Wednesday will be on earnings reports, including Hindustan Unilever Ltd., for clues on a demand recovery. The seller of Dove soap and Bru coffee will likely see subdued volume and revenue growth in the three-months through December as urban demand — which accounts for two-thirds of the total — has lagged levels seen in rural areas for three quarters. 

Rising expectations of a rotation toward China after US President Donald Trump delivered a softer tariff approach may also hurt foreign demand for Indian assets. While Trump said he is considering 10% tariffs on Chinese goods, it is lower than the levies of 60% he threatened on the campaign trail.

Read: Softer China-Tariff Talk Is Inspiring Some Hedge Funds

“There is some hope of a rotation to China from markets like India given Trump’s reconciliatory tone on tariffs and Tiktok so far,” said Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities. “Perhaps China may be able to strike some deal” with the US, he said.

Indian shares remain among the world’s most expensive despite the slide, trading at close to 19 times forward earnings. Investor focus is now turning to the federal budget announcement on Feb. 1, where they hope for measures to stimulate consumption and provide a boost to growth. 

“India remains off the investors’ radar with most participants seeing further decline in the equity markets,” Bank of America analysts including Ritesh Samadhiya wrote in a note dated Jan. 21, citing a survey of fund managers.

—With assistance from Alex Gabriel Simon and Chiranjivi Chakraborty.

(Updates with comments from BNP Paribas in seventh, eighth paragraphs.)

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