Foreign selling in Indian equities nearing exhaustion, but global investors still cautious on India: Goldman Sachs

New Delhi [India], May 10 : Foreign investor selling in Indian equities may be nearing exhaustion after record outflows in recent months, but a meaningful return of foreign capital could still take time due to expensive valuations, weak earnings visibility and global investor preference for North Asian markets, according to a Goldman Sachs India strategy report.

In its report titled "Outflows Fade, But Re-entry Waits," Goldman Sachs said foreign ownership in Indian equities has fallen to a 14-year low and slipped below domestic institutional ownership for the first time in more than two decades.

"Foreign ownership in equities dropped to a 14-year low in 1Q CY26, and slipped below domestic institutions for the first time in over two decades," the report stated.

The report noted that foreign institutional investors (FIIs) have already sold USD 22 billion worth of Indian equities so far in 2026, surpassing the previous annual sell-off record.

"Foreigners have sold US$22bn ytd, already surpassing the annual selloff record ($19bn outflows in 2025) over the last 2.5 decades," Goldman Sachs said.

According to the report, cumulative foreign selling since the September 2024 market peak has reached USD 53 billion.

"Since Sep'24 peak, foreigners have sold a record $53bn of Indian equities," it added.

Despite the sharp outflows, Goldman Sachs believes the majority of foreign selling may now be behind the market.

"The bulk of foreign selling is likely over," the report said, adding that various measures of flows, positioning and ownership trends suggest that "foreign flows are now close to downside scenarios."

The brokerage estimated that the downside risk of further foreign selling could be limited to around USD 4 billion to USD 5 billion in the near term.

However, the report cautioned that foreign inflows may not return immediately even if oil prices soften.

"Empirical evidence suggests FII flows do not immediately return when oil prices fall," Goldman Sachs said.

It pointed out that foreign capital did not return to Indian equities during the early-April correction in oil prices despite heavy selling during the preceding oil rally.

The report also highlighted weakening earnings visibility as a key concern for global investors.

"Earnings revisions have become an increasingly important variable guiding foreign flows in Indian equities," it stated.

Goldman Sachs further said India currently offers a "less attractive risk/reward" compared to several North Asian markets because Indian equities continue to trade at significantly higher valuations.

"Compared to North Asian markets, India offers a less attractive risk/reward as it trades at significantly higher growth-adjusted valuations," the report said.

The report added that investor concerns over the potential impact of artificial intelligence on market positioning and earnings expectations have also contributed to the shift in global capital flows toward North Asian markets.

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