After selling over $18 billion of equities in 2025, the highest ever yearly outflow, foreign investors have also remained net sellers so far this year. But in the near term, analysts expect domestic institutional buyers to keep a stock market that is already trading close to record highs afloat.
India’s benchmark indices underperformed their Asian and emerging-market peers in 2025 for the first time in five years due to stretched valuations, softer earnings and a sharp exodus of foreign capital amid heightened geopolitical uncertainties.
The Nifty 50 was forecast to rise around 4% to 26,500 by mid-2026 from Wednesday’s close and reach 27,750 by year-end, the February 16-25 poll of 32 analysts showed.
By mid-2026 the BSE Sensex was projected to climb to 87,293 and to 89,625 by year-end. At mid-2027 it will be around 92,000. This was the first downgrade to median estimates since the August 2025 poll.
“Going by the dramatic turn of events in the past couple of months, I would say we definitely had to rethink our views on major indices,” said Madhavankutty G, chief economist at Canara Bank.
“Domestic investments will continue at a good pace. But unfortunately, the only thing hampering investments is the extremely volatile geopolitical situation – and that would spook foreign investors.”India’s limited exposure to the global AI trade and more attractive valuations in other emerging markets are keeping foreign investors from committing capital to the world’s fastest growing major economy, analysts said.
Responding to an additional question on when foreign institutional investors will become net buyers of Indian stocks again, most expected this to occur in the second half of 2026. One saw no reversal for 2-3 years.
“Given a very strong focus on the technology sector overall, and particularly AI and semiconductors, on which India has very little presence … investors are not feeling too much of a missing-out element by not buying India at this point,” said Rajat Agarwal, Asia equity strategist at Societe Generale.
India’s Sensex trades at over 23 times forward earnings, among the highest globally and above the U.S. S&P 500’s 21.6 – according to LSEG data.
Meanwhile, a bout of AI-driven disruption in India’s IT services sector, on track for its worst month since April 2003, has reinforced investor caution.
The Nifty IT index slumped 4.7% to a 30-month low on Tuesday. The sub-index has fallen 21% in February, wiping out an estimated $68.5 billion in market value from its 10 constituents.
A majority of analysts who answered an additional question, 18 of 31, said a correction to the domestic stock market – defined as a drop of 10% or more – was likely within three months. Thirteen said it was unlikely. That marked a sharp shift from a November poll, when nearly three-quarters said it was unlikely.