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AI Trade Drives FPI Outflows from India Amid Stock Overvaluation Concerns

Foreign portfolio investors are pulling money from India due to the AI trade attracting capital to South Korea and Taiwan. Net FPI outflows from India reached Rs 60,848 crore in April and Rs 191,968 crore in 2026. Domestic institutional investors are absorbing selling pressure with Rs 51,000 crore in investments. Analysts expect the trend to continue as long as AI stocks remain attractive.

Key Points: AI Trade Behind FPI Outflows from India

  • AI trade in South Korea and Taiwan driving FPI inflows
  • India sees net FPI outflows of Rs 60,848 crore in April
  • DIIs provide market support with Rs 51,000 crore investments
  • Crude oil prices surge amid US-Iran tensions
2 min read

AI trade behind FPI outflows from India as AI stock overvaluation concerns linger

Analysts warn that AI trade in South Korea and Taiwan is driving FPI outflows from India, with net outflows of Rs 60,848 crore in April.

"So long as the AI trade continues, the trend of FPI outflows from India is likely to continue. - Dr VK Vijayakumar"

New Delhi, May 3

As long as the artificial intelligence trade continues, the trend of foreign portfolio investors outflows from India is likely to continue, analysts said on Sunday.

A significant trend in FPI flows this year is that Japan, South Korea and Taiwan are attracting significant inflows while India and some other emerging markets which are facing headwinds from the energy crisis and currency depreciation are facing outflows.

"An important factor driving capital flows is the AI trade, particularly in South Korea and Taiwan," said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

During April, FPIs were sellers in the market for Rs 63,167 crore while they invested Rs 2,319 crore through the primary market taking the net FPI outflows to Rs 60,848 crore.

The total FPI outflows from India in 2026, so far, stands at Rs 191,968 crores.

Two companies in South Korea - Samsung and SK Hynix - and one in Taiwan - TSMC - are attracting the lions share of these inflows, said the analysts.

"The excellent results being posted by these companies are providing the fundamental support to the FPI flows into these markets. So long as the AI trade continues, the trend of FPI outflows from India is likely to continue. However, there are concerns of overvaluations in AI stocks," said Vijayakumar.

Meanwhile, FIIs continued to remain net seller for the 10th consecutive month in April.

On the other hand, domestic institutional investors (DIIs) continue to provide support to the market, emerging as net buyer during last month, with investments totalling Rs 51,000 crore.

DIIs are absorbing a significant portion of the selling pressure and limiting deeper market declines.

Meanwhile, crude oil prices surged during last week following confirmation from the White House that President Donald Trump had asked officials to prepare for a prolonged blockade of Iranian ports.

The Indian equity benchmarks closed in the red last week, as persistent selling from the FIIs and higher crude prices weighed on market sentiment.

Going ahead, institutional activity is likely to be primarily influenced by global news developments, said analysts. The outcome of the state assembly election on Monday will also have impact on the Indian equity market in the coming week.

- IANS

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Reader Comments

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Priya S
The article rightly points out that AI is driving flows to Taiwan and South Korea, but I wish it had mentioned how India's own tech sector could benefit from this narrative. We have incredible AI talent in Bengaluru, Hyderabad, and Pune. The government should create a dedicated AI manufacturing hub to attract some of that FPIā€”instead of just watching it go elsewhere. Energy crisis is real, but we can turn this around. šŸ˜Š
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Michael C
As an observer of global markets, I see India's current outflows as part of a broader rotation into AI-exposed markets. The overvaluation concerns in AI stocks are real, but the momentum is strong. For Indian investors, this could be a good time to accumulate quality stocks on dipsā€”DIIs are showing the way. Just don't try to time the FPI exit perfectly; it's like catching a falling knife.
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Vikram M
I am in Indian IT, and let me tell you, the AI trade is not as rosy as it seems. Samsung and SK Hynix are seeing temporary demand surgesā€”memory chips are cyclical! TSMC has geopolitical risks. India should not copy-paste the Taiwan model. We need to focus on AI applications for our domestic marketā€”agriculture, healthcare, education. That will attract long-term FPI, not this hot money. Just my two paise. šŸ˜…
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Rahul R
Honestly, I'm more worried about crude oil prices. The US blockade on Iran will hit us hardā€”we import so much! ā‚¹60,000 crore FPI outflow in April is big, but if oil goes to $100+, then equity market will see deeper selling. The state election outcome matters, but global factors will dominate. My portfolio is heavy on financials and consumptionā€”hoping they hold up. Stay cautious, everyone. šŸ™

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