Indian Finance Minister Highlights Risks for the Country's Economy in 2027

Indian Finance Minister Nirmala Sitharaman identified capital outflow as one of the major threats for India in 2027. Nifty 50 has lost 12.13% since the beginning of 2026, and SENSEX has dropped by 12.78%. The minister attributed part of the weakness to excess liquidity in the market.

"Due to the ease of liquidity and availability, people are exiting easily," Sitharaman told CNBC on the sidelines of the IMF and World Bank meetings in Bangkok. Foreign portfolio investors have sold more than $33 billion of Indian stocks this year (NSDL). In September, they withdrew $4.1 billion, reversing an August inflow of $2.4 billion (HSBC Mutual Fund). In contrast, local institutions bought $8.1 billion in the same month, and equity mutual funds have recorded inflows every month since March 2021.

Indian IPOs attracted $60.4 billion from 2021 to 2025 (EY); selling shareholders took $37.7 billion, or 63%. In August, India conducted nearly $10 billion in record stock deals.

India's weight in MSCI Asia Pacific ex-Japan has fallen to 10% from 19% a few years ago (Goldman Sachs); Taiwan and Korea account for 29% and 22%. Sitharaman called capital outflow to AI and the US a cause for concern but noted that India would not be affected by an AI bubble burst as it has not attracted such investments.

Outflows are also pressuring the rupee along with high oil prices and rising US Treasury yields. According to Reuters, the RBI has spent about half of the mobilized $140+ billion; three economists estimate spot dollar sales and swaps since June 8 at $75–80 billion. Reserves as of October 2 were $734.6 billion—$51 billion below the early September peak. Ambit warned: the sharp drop in usable reserves after adjusting for forward shorts and gold has reached a noticeable level, and continuation could raise doubts about the RBI's ability to defend the rupee. For six months, the regulator has intervened every time the rupee approached 97 per dollar.

HSBC Mutual Fund expects corporate earnings to determine yields in the near term: Nifty is trading at 17 forward earnings—13% below the five-year average.