Nirmala Sitharaman Makes Key Remarks on the Stock Market

Union Finance Minister Nirmala Sitharaman has commented on the volatility in Indian stock markets and the decline in benchmark indices, attributing relatively low profit booking to the ease with which investors can sell their holdings and the high liquidity in domestic markets. Speaking in an interview with a media organisation in Thailand, she discussed the performance of the Indian economy and the challenges facing equity markets. Despite US President Donald Trump’s tariffs and geopolitical tensions, Sitharaman said India’s economic growth remained encouraging. However, she acknowledged concerns over a decline of around 12% in major stock market indices and continued withdrawals by foreign investors. Foreign investors have reportedly pulled out more than $33 billion from Indian equities this year, redirecting funds towards artificial intelligence-related companies in Taiwan and South Korea. Sitharaman acknowledged that these capital outflows were a matter of concern for the Indian market.

Despite the withdrawal of foreign investments, domestic investors continue to support Indian equities through sustained inflows, the Finance Minister said. She expressed the view that even if a global AI investment bubble bursts, the impact on India could be limited because the country’s exposure to large-scale AI investments remains relatively low. She also said India was not lagging in advanced technology, pointing to investments in semiconductor manufacturing. Although benchmark indices have declined, she maintained that the fundamentals of the Indian economy remain strong. However, she cautioned that continued foreign investment outflows could pose challenges for Indian markets in 2027. Meanwhile, equity-oriented mutual funds have recorded monthly net inflows since March 2021. Experts say the steady flow of domestic investments, particularly through systematic investment plans (SIPs), has helped maintain liquidity and provided support to the stock market despite withdrawals by foreign institutional investors (FIIs).