BofA says foreign investors unlikely to return to Indian equities before 2027

Foreign selling in Indian equities may continue into 2027 and possibly beyond as investors shift focus toward Asian markets linked to artificial intelligence growth, according to BofA Global Research. The brokerage said global investors are moving toward markets offering stronger earnings growth and relatively lower valuations, while Indian equities continue to face earnings downgrades and sustained foreign outflows.

BofA India research head Amish Shah said global investors are unlikely to return to Indian markets before 2027 or even 2028. He stated that AI-driven markets in Asia are currently witnessing earnings upgrades, while India is experiencing weaker growth expectations. According to the brokerage, Indian stocks have been among the weakest-performing markets globally in 2026, with a falling rupee adding pressure to foreign investor sentiment.

The report stated that foreign investors have pulled out nearly $23 billion from Indian equities so far this year. BofA retained its earnings growth forecast of around 8.5 percent for companies listed on the NSE Nifty 50 Index for the financial year ending March 2027. For the current financial year, the brokerage estimated earnings growth at around 7 percent.

BofA also noted that Indian equity valuations remain relatively expensive despite a decline in benchmark indices this year. According to the report, the Nifty 50 currently trades at nearly 18 times one-year forward earnings, compared with around 7.5 times for South Korea’s benchmark index. The brokerage said South Korea and Taiwan are currently recording stronger earnings growth linked to AI-driven sectors.

The brokerage further stated that ongoing geopolitical tensions in West Asia and concerns over rising energy costs continue to affect India’s economic outlook because of the country’s dependence on crude oil imports. Shah also said rupee depreciation remains a structural challenge for India. According to the report, the Reserve Bank of India and policymakers are closely monitoring global conditions as foreign investment flows remain linked to developments in the West Asia conflict and the global AI investment cycle.