Raamdeo Agrawal, chairman of Motilal Oswal Financial Services, said that foreign portfolio investors have been pulling back from Indian equities over the past two years. He attributes the outflows to a mix of domestic valuation concerns, the hype around artificial intelligence and heightened geopolitical risks, all of which have eroded the appetite for emerging‑market exposure. Indian stocks are trading at multiples that are among the highest in the world, especially in technology and AI‑linked companies. While the sector promises long‑term growth, the current price levels leave little room for error and make the market vulnerable to any shift in sentiment.
For retail investors, this means that the cushion against downside moves is thinner than in previous cycles. The AI frenzy has also attracted speculative capital, inflating valuations beyond fundamentals. At the same time, geopolitical flashpoints—from US‑China tensions to unrest in the Middle East—have heightened risk aversion among global fund managers. These dynamics have prompted many FPIs to rotate out of high‑growth Indian stocks into safer assets, adding pressure on the Nifty and Sensex.
The immediate impact has been a modest dip in the Nifty, with volatility edging higher. Retail investors should focus on quality businesses with strong balance sheets, avoid chasing short‑term AI hype and consider diversifying across sectors. Maintaining a long‑term perspective and staying disciplined can help navigate the current turbulence.