India's Market Shadowed by US Tech Rally

Foreign portfolio investors have withdrawn ₹69,000 crore from India in 2025, as the allure of the US tech market's "magnificent 7/10" rally diverts attention and capital. This sustained tech-led bullish trend in America has left investors with little bandwidth to explore other markets. India's market has consequently traded sideways, with FPI flows showing a net negative trend over the past two years.

The current investment landscape is heavily focused on AI, rare earths, and tech infrastructure, areas where India is perceived to be lagging. While domestic mutual fund inflows are propping up the Indian market, its valuation at 22 times earnings, against a long-term average of 17, makes it less attractive compared to the US, which is near all-time highs. India's relatively small weight in global indices further contributes to its underinvestment.

A reversal in FPI flows to India is contingent on a significant correction in US markets. The ongoing tech boom, particularly around AI, is viewed by some as a potential bubble, fueled by liquidity infusion and speculative business models. Until this bubble shows signs of bursting or the US market experiences a substantial downturn, attracting substantial foreign investment remains a challenge for India.