FPI outflows have nothing to do with their belief in India growth story: Neelkanth Mishra

Expressing confidence about the India’s strong macroeconomic fundamentals, Neelkanth Mishra, Executive Director, World Bank and UIDAI Chairman said that it is hard to expect foreign portfolio investment (FPI) flows to turn in this global environment, but they continue to believe the India growth story.

In an interaction with Business Today, he said that foreign fund flows may not come to India immediately due to high US interest rates and other global factors even though emerging markets on the whole have outperformed developed markets this year and continue to do so.

“Asset allocators are starting to get into emerging markets (EMs) now, but a big flow of funds is not happening yet, and especially in the last two months, if the interest rates have gone up in the US long-term rates, it is very difficult to see FPIs getting flows, and therefore flows coming to India,” he said, underlining that this has nothing to do with whether they believe in the India growth story or not. “I haven't found anyone who disbelieves the India growth story,” he said.

Foreign portfolio investors have pulled out over Rs 35,000 crore from Indian equities in the month of September and as much as Rs 2.32 lakh crore in 2026.

Noting that US 10-year yields are around 5.3% and mortgage yields are even higher at around 7.5%, Mishra said the commensurate return on riskier assets of emerging markets needs to be much higher.

“In this environment, it's very hard to expect that FPIs is will become very warm towards India, because India is not an asset class yet. It is only getting money through EMs and Asia funds, and on both these there are issues,” he said.

For example, South Korean equities performed very well last year but they are struggling this year despite the fact that the memory market is doing well and there is expectation that the memory prices will remain elevated for a while, he said.