Bank of America Predicts Continued Exit of Foreign Investors from Indian Stock Market Through 2027

Foreign Selling in Indian Equities May Extend into Next Year

Foreign selling in Indian equities may persist into 2027 or even 2028, according to a recent analysis by BofA Global Research. The brokerage firm notes that Asia's artificial-intelligence (AI) winners offer stronger earnings prospects at cheaper valuations, leading global investors to favor these markets over India.

India is facing earnings downgrades, while other AI-driven markets such as South Korea and Taiwan are seeing upgrades. As a result, local stocks are among the worst performers globally so far in 2026, with a weakening rupee exacerbating a record $23 billion foreign selloff. Global investors are continuing to chase AI-linked plays elsewhere in Asia.

BofA has retained its forecast of about 8.5% earnings growth for NSE Nifty 50 Index companies in the financial year that ends in March 2027. However, this growth rate is considered low, especially when compared to the expected earnings growth in other Asian markets. The brokerage estimates earnings growth for the current fiscal year at around 7%.

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Relative valuations for the Nifty 50 remain expensive despite this year's 9% drop, trading at around 18 times its one-year forward earnings. This is in contrast to the benchmark in Korea, which trades at 7.5 times its one-year forward earnings and has been the world's best-performing stock market this year.

BofA's forecast follows its recent warning of stagflation risks rising for India, mainly due to the country's dependence on energy imports from war-torn regions. The brokerage firm also noted that rupee depreciation remains a structural challenge for India. Until the West Asia conflict comes to an end and the AI capex cycle peaks out, domestic money is likely to continue chasing Indian mid- and small-cap stocks.