India's Finance Minister Blames Excess Liquidity for Market Declines

Indian Finance Minister Nirmala Sitharaman stated that excess liquidity and the ease of capital exits are hurting the country's stock market performance. According to the minister, the availability of resources allows investors to abandon positions with excessive speed. This scenario persists despite the resilience shown by local economic fundamentals.

Since the start of the year, India's main benchmark indices have fallen by nearly 12%. This movement reflects a record volume of withdrawals by foreign investors. Industry reports show that more than 33 billion dollars have been pulled from the Indian stock market this year alone.

A significant portion of initial public offerings held between 2021 and 2025 served as an exit for existing shareholders. About 63% of the capital raised in IPOs during that period went to these sellers rather than to company growth. Meanwhile, global capital has migrated to markets focused on artificial intelligence, such as Taiwan and South Korea.

The minister highlighted that the flight of resources to other sectors and the United States represents a challenge for local stability. India's weight in the MSCI Asia Pacific ex-Japan index has dropped from 19% to 10% in recent years. Despite this, the flow of domestic investors into mutual funds has remained constant since 2021.

The exit of capital from emerging markets toward assets considered safer or focused on technology may increase currency volatility and reduce the attractiveness of local currencies against the dollar.