“From May 2024 till early this year, we saw relentless selling due to technical factors. Other markets like Japan, Korea, and China were performing better, while Indian valuations seemed very high. There was a huge exodus of foreign outflows over 18–19 months,” Mukhopadhyay said.
He noted that sentiment has improved slightly following the Union Budget and a U.S.-India trade deal in September. “We saw decent inflows in early February, but the AI-led selloff affected markets again. Sentiment has turned, but most funds are still marginally underweight on India. It’s a wait-and-watch scenario.”
Mukhopadhyay highlighted the sectors attracting FII interest. “Post-Budget, the theme has been to invest in companies with strong earnings visibility, like banks and capex-driven sectors. Growth and new-age stocks are still seeing cautious allocation.”
He added that earnings remain key for FII confidence. “The earning season has been okay, with some marginal upgrades. For confidence to return, investors want to see earnings come through. The rupee has stabilized post-Budget, which is also positive.”
On AI’s impact on IT companies, Mukhopadhyay said caution remains despite opportunities. “Top Indian IT companies have astute management and strong balance sheets. They can pivot if needed, making stocks attractive. But we cannot predict exactly where the base will be.”
He warned about broader economic implications. “The IT industry has been labor-intensive, supporting millions of jobs. A transformation with hiring freezes or layoffs could affect consumption in real estate, autos, and other sectors. Companies may survive, but the middle-class impact is significant.”As FIIs weigh valuations, earnings, and structural risks, Mukhopadhyay’s insights underscore the need for a measured approach to investing in India amid global market shifts and technological disruption.