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

New Delhi: As long as the artificial intelligence (AI) trade continues, the trend of foreign portfolio investors (FPIs) 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