Foreign investors continue to sell off, suppressing the upward momentum of the Indian stock market.

Even though the easing of tensions in the Middle East has brought about optimism, any rebound in the Indian stock market is difficult to sustain as foreign investors continue to reduce their positions in the market. Boosted by the overall rise in global stock markets, India's major stock indices posted their best gains since May 2025 on Wednesday. However, preliminary data released by the exchange showed that foreign investment is still selling off Indian stocks, with their consecutive selling streak reaching a record high. In contrast, foreign investors have been net buyers in the stock markets of Taiwan and South Korea. Concerns about the slowdown in profit growth for Indian companies have clouded the outlook for the stock market - with the current valuation of Indian stocks already exceeding 18 times forward earnings, this level lacks fundamental support. According to Jefferies, excluding commodity companies, profit growth for Indian corporations is only expected to be 10%. The software services industry, a significant contributor to index profits, is facing net losses due to more companies adopting artificial intelligence. Meanwhile, the Indian banking sector is potentially facing losses on forex bets, and the consumer sector will bear the brunt of the energy shocks triggered by the US-Iran conflict. India's economy is expected to grow by 6.9% this fiscal year, outperforming most economies, but investors are concerned that company profits may not double as anticipated. In this context, foreign investors are likely to continue reducing their holdings during each rebound.